Video hardware

Expect More IPTV M&A

In the wake of the Cisco Systems Inc. (Nasdaq: CSCO) acquisition of Scientific-Atlanta Inc. (NYSE: SFA) announced Friday, close observers of the IPTV space see more M&A activity coming as vendors position to offer “end-to-end” solutions. (See Cisco to Acquire Scientific-Atlanta.)

The Cisco/Scientific-Atlanta deal can be seen as an affirmation of vendors' belief that carriers want an end-to-end IPTV solution where all hardware and software elements are closely integrated and provided by one accountable entity: one neck to choke, in industry parlance. (See Will IPTV Bloom in 2006?.)

“In mature markets carriers tend to look for best-of-breed solutions,” Cisco VP Mike Volpi said while discussing the merger on a conference call Friday. “But video is not a mature market yet, and carriers are looking for an end-to-end solution.”

Yet true end-to-end IPTV solutions remain hard to come by. Most of the players in the space, like Microsoft Corp. (Nasdaq: MSFT) and Alcatel (NYSE: ALA; Paris: CGEP:PA), depend upon partnerships to fill gaps in their “end-to-end” solutions.

Heavy Reading IPTV analyst Rick Thompson suggests the Cisco acquisition of Scientific-Atlanta may accelerate consolidation in the space as incumbent vendors seek to fill those gaps.

Why? Thompson suggests that it's the clear statement Cisco is making about the IPTV market itself: “Video, specifically IPTV -- telco video -- has been a combination of market hype and initial execution in 2005. This acquisition tends to stamp a lot of this hype with a certificate of reality.”

Until today, the large gear makers for the most part have chosen to partner with makers of IPTV middleware, which is considered to be the central nervous system of IPTV distribution. Alcatel dropped its own IPTV middleware product in favor of a tight partnership with Microsoft and its middleware product. Siemens AG (NYSE: SI; Frankfurt: SIE) acquired the middleware company Myrio. (See Siemens Boasts IPTV Success.)

Others, meanwhile, are fostering co-marketing and co-integration relationships resulting from existing or potential mutual customer deals. Sources say examples of this include the Nortel Networks Ltd. (NYSE/Toronto: NT) engagement with Minerva Networks Inc. and the Lucent Technologies Inc. (NYSE: LU) engagement with Orca Interactive Ltd..

Thompson feels the Cisco/Scientific-Atlanta deal may open the doors to new types of these pairings. And the first of them, he believes, may be acquisitions of video on demand (VOD) server vendors.

“VOD vendors, specifically for IPTV, have a very network-centric view of the video storage and distribution problem,” Thompson says. "Intelligent content distribution algorithms will be an important requirement as these IP video networks grow."

The VOD server crowd includes such names as Entone Technologies Inc., Kasenna Inc., and BitBand. (See BitBand Deploys VOD , PCCW Deploys Entone for VOD, and Kasenna Wins Cavalier Deal.)

“VOD services also have a high value as compared to broadcast/multicast services and will be the differentiating video services going forward, not to mention much of the reason for deploying an IP-based architecture that can better handle an expected increase in unicast VOD traffic,” Thompson says.

Thompson believes Cisco’s acquisition of a content processing and video headend player is a move that might be repeated by other incumbent vendors. Prominent players in the headend space include Tut Systems Inc. (Nasdaq: TUTS), Tandberg Television, and SkyStream Networks Inc.

Thompson also points to conditional access and digital rights management (DRM) companies as attractive acquisition targets in the near term. (See Verimatrix Tackles Video Piracy and Widevine Wins TVN Contract.)

— Mark Sullivan, Reporter, Light Reading

materialgirl 12/5/2012 | 2:53:20 AM
re: Expect More IPTV M&A CSCO just spent $7B on a losing proposition. Under the 60-odd posts about the SBC IP-TV initiatives, no one could find one real money-making rationale for this expensive, closed, Internet copycat. Meanwhile, Warner Bros. is starting to publish "TV Classics" over AOL.

All anyone wants from a service provider is a pipe. They can handle their own VOD and content for peanuts on their own disk drive. My money is on GOOG, with a real money-making NG "content" proposition, and a cheap L2-WiMax network behind it. i-Tunes is not hurting AAPL either.

This is a regulatory nightmare, a kick-back to Republican contributors. With the money we blow in one month in Iraq, we could fiber every house here. Instead of moving on like Korea, our regulators try to drive voice back to the dark ages by crippling VoIP with E911 requirements, then punish cable cos for working hard and investing $95B over the past decade by handing over state-wide license deals to IP-TV efforts, while forcing cable cos to live up to old muni obligations.

Shame on this whole IP-TV joke. It displaces money we could use for a REAL network, for this stupid sham that will fail in the long run. Go GOOG! Go AAPL! Take all those content dollars and force this expensive, commodity, ship of fools aground.
broadbandwatcher 12/5/2012 | 2:53:18 AM
re: Expect More IPTV M&A A direct-to-Internet model for VoD, utilizing the fat pipe, seems to be an unavoidable attraction for residential customers. Just getting video content off a web site -- and leaving IPTV providers scratching their heads -- is a bad dream haunting telcos (and cablecos).

Add VoIP to this kind of fat pipe, and and it rounds out the picture even more. An L2 stake in someone like iBasis, for example, plus the added access of WiMax, would be even more haunting for the likes of the "new" AT&T.
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