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Orca Still in Takeover Talks

Ray Le Maistre
8/31/2007

Nearly eight months after first announcing it was in M&A negotiations, IPTV middleware vendor Orca Interactive Ltd. says the takeover talks are still going on and that multiple parties are still involved.

In January, Orca announced that talks were underway, with industry sources and market reports suggesting that existing partner Comverse Inc. (Nasdaq: CNSI) was the leading suitor. (See Orca in IPTV Takeover Talks.)

Orca's CEO Haggai Barel says he can't identify any of the parties involved, but notes that the companies involved are at "different levels" of negotiations. He also says there isn't any one factor prolonging the M&A talks and that Orca does not have any targets to hit before any agreement can be signed.

"The talks are ongoing. We have already been through due diligence, so it's not a matter of diligence -- we have proved we are a good company. It just takes a long time. There are lots of issues to discuss -- price, structure. It's not about any one specific thing," the CEO tells Light Reading.

Comverse isn't commenting on the matter. During a recent phone conversation with Light Reading, Comverse president Yaron Tchwella, who has been running the company since April, wouldn't comment on any M&A issues in the IPTV sector but did say that Comverse is "working with several companies… that have complementary technology."

He did note, though, that Comverse has "plenty of cash" to make any acquisitions it needs.

Not that anyone would need too much to buy Orca. The company is losing money on small revenues and had a cash balance of just $14.6 million at the end of June.

Things are picking up for the IPTV middleware specialist, though. In a market where major carrier accounts are dominated by Microsoft Corp. (Nasdaq: MSFT), Nokia Networks (Myrio), Thomson S.A. (NYSE: TMS; Euronext Paris: 18453), and UTStarcom Inc. (Nasdaq: UTSI), Orca is targeting smaller opportunities with Tier 2 and 3 service providers.

But even in that market the competition is tough, with the likes of Conklin Corp. , Espial Group Inc. , Iskratel d.o.o. , Minerva Networks Inc. , Kasenna Inc. , and NDS Ltd. all battling to win the smaller accounts. (See Espial Joins IPTV Middleware Madness, BitBand, Conklin-Intracom Win, Iskratel Partners for IPTV Package, NDS Joins Nortel's IPTV Party, Minerva Expands Suite, and Kasenna Struts at TelcoTV.)

Despite the crowded market, Orca has been making better headway this year, especially in Southern and Eastern Europe, and even announced a deployment in North America. (See WTS Uses Orca Middleware, Orca Wins Russian Deal, Lattelecom Uses Orca, and Orca Wins Greek Deal.)

In the first six months of this year, Orca reported revenues of $3.2 million, up from a measly $0.9 million a year earlier, and registered a net loss of $2.2 million, better than the $3.4 million loss suffered in the first half of 2006. (See Orca Reports H1.)

The company also just announced a deal valued at $3 million with Blockbuster in Israel, though this was a deal won through the back door, as the company's half-year report to the London Stock Exchange shows that Orca holds a 33.33 percent stake in Blockbuster's Israeli franchise. Orca notes that, under the conditions of the stakeholding agreement, it "will become the sole provider to the Franchise of an end-to-end IPTV solution system."

The deployment of that system, though, will give Orca the chance to show off some new capabilities, as Blockbuster Israel plans to launch "commercial PC download and IPTV services" using Orca's new "hybrid IPTV and WebTV solution." That solution "supports both managed and unmanaged environments to help service providers expand their customer base and market reach."

CEO Barel says his company will show off this capability at next weeks' IBC tradeshow in Amsterdam and believes it will attract attention from many operators: "Operators could lose business to the likes of iTunes and Amazon for the downloading of TV programs. This [combined IPTV/WebTV capability] gives carriers the chance to compete and hold on to those WebTV revenues as well as the business they are building through set-top boxes."

The new hybrid technology isn't Orca's only new development. Following its first success in North America at W.T. Services, a subsidiary of West Texas Rural Telephone Cooperative, Orca plans to open an office on the West Coast of the U.S. before the end of September.

— Ray Le Maistre, International News Editor, Light Reading

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venturecapital
venturecapital
12/5/2012 | 3:03:21 PM
re: Orca Still in Takeover Talks
Problem with Nortel as an acquirer is that it lacks a DSLAM to bundle with any IPTV offering.
digits
digits
12/5/2012 | 3:03:21 PM
re: Orca Still in Takeover Talks
Orca has experience, knowledge, and a growing presence, albeit at a small level. At the sort of price it would command, wouldn't it be worth a gamble by some of the bigger players looking to firm up their IPTV activities?

Nortel, for example?

Just a thought...

stamiwin
stamiwin
12/5/2012 | 3:03:20 PM
re: Orca Still in Takeover Talks
There are rumors that few European IPTV related companies are talking with Orca Interactive,
isn`t it going too slow...
But what will be affordable price?? $14M G Cash value? More than that??
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