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Moto Buys Swedish Set-Topper

Motorola Inc. (NYSE: MOT) acquired its way into the European IPTV market today with the acquisition of Swedish set-top box vendor Kreatel Communications AB , which has already built an impressive carrier customer list. (See Motorola Acquires Kreatel.)

Kreatel has been shipping its IP-based units since 2001, when Italian triple-play pioneer Fastweb SpA (Milan: FWB) handed it a significant order worth millions of dollars. Since then it has added the likes of Spain's Telefónica SA (NYSE: TEF), Scandinavian powerhouse Telia Company , Dutch incumbent KPN Telecom NV (NYSE: KPN), Norway's Lyse Tele AS , and Canadian operator SaskTel to its customer list. (See Lyse Tele Uses Kreatel for IPTV.)

Kreatel CEO Lars Bengtsson says the company has about 25 carriers using the firm's products in commercial deployments, plus a number of additional trials and pilots. Most of the deployments are in Europe, he says, though the company recently broke into the Asia/Pacific market with an engagement at Indian broadband player Atlas Interactive . (See ZTE Gives Indian Carrier Some Credit.)

No financial details of the acquisition, due to close this quarter, were released. But Kreatel CEO Lars Bengtsson says the deal is a good one for both Motorola and his company's investors, which, he says, have pumped about 250 million Swedish Kroner (US$32.4 million) into Kreatel.

Bengtsson also says his company is on course to double its revenues, year-on-year, in 2005, which would give it annual sales of about €30 million ($36 million). The company has about 50 staff and has shipped about 400,000 units to date.

Given that Kreatel is believed to be a profitable company, Motorola is likely paying anything between $40 million and $80 million, as this would give the Swedish firm's investors a premium, and fall in line with the going rate for technology startups of between one and two times annual revenues.

Motorola's share price is down 38 cents, about 1.6 percent, to $23.65 today.

The acquisition is no great surprise, says Heavy Reading senior analyst Rick Thompson, who predicted further IPTV market consolidation last year following the purchase of another set-top box firm, Scientific-Atlanta Inc. . (See Expect More IPTV M&A and Cisco to Acquire Scientific-Atlanta.)

"This move confirms continued consolidation of the larger companies with smaller, niche players in the IPTV space that I saw coming last year," says Thompson. "It's a good move for Motorola: Kreatel is solid, has some good deployments, and will give Motorola a better view into telco IPTV deployments."

"This deal gives us an immediate presence in European IPTV, greater technical diversity to meet customer needs, and expertise that we can leverage in Europe and into the Asia/Pacific region," says Doug Means, VP and general manager of Motorola's Connected Home division.

Is this just the start of Motorola building up a significant IPTV presence in Europe? Will there be further, complementary acquisitions? "We're looking at all this, but we have nothing further to discuss today," says Means, who adds that Motorola intends to maintain and develop Kreatel's existing partnerships with Siemens Communications Group and many other specialist vendors. (See Orca to Unveil SDP at IBC, IBM Scopes Out IPTV Party, Vendors Stage IPTV Demo at IBC, and SeaChange, Net Insight, Kreatel Do VOD.)

Whether its Motorola buying more companies or not, the Kreatel CEO, like analyst Thompson, expects to see more acquisitions. "There has already been a number of significant acquisitions and alliances, and I expect to see more," says Bengtsson, though he wouldn't hazard a guess as to whether some of his direct competitors, such as Amino Technologies plc (London: AMO) or Swedish rival i3 Micro Technology AB might be likely targets.

Grant Masom, chairman of London-listed Amino Technologies plc (London: AMO), declined to comment on any M&A matters, but noted that Motorola's move showed how important the technology -- "especially the software that runs on the set-top box hardware" -- is in IPTV. "This backs up what we have been saying all along, and supports our view that there's a big opportunity in the IPTV set-top box market," he says.

Masom adds that the Moto buy doesn't threaten Amino: "We are a preferred partner for the likes of Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Ltd. -- I don't see this changing anything for us."

Amino's share price remained unchanged today at 162.5 pence. I3 Micro Technology had not returned calls as this article was published.

— Ray Le Maistre, International News Editor, Light Reading

digits 12/5/2012 | 4:09:00 AM
re: Moto Buys Swedish Set-Topper I'd be surprised if Motorola stops here -- Kreatel gives it a position in the home in some key accounts, but I can't help feeling it will need to back that up with a security/Digital Rights Management (DRM) firm for IPTV -- maybe Latens -- some IP-capable video delivery capabilities (maybe Entone), and possibly some IPTV-specific middleware in the same way Siemens acquired Myrio.
It might be tough finding the right fit, though.

Can anyone see a logical fit? Or could this be enough for Moto to lever in its existing technology into Europe and Asia/Pac?
optiplayer 12/5/2012 | 4:08:59 AM
re: Moto Buys Swedish Set-Topper Given:

1. Rapidly growing revenue
2. Profitability
3. IPTV buzz

I hope Kreatel did better that 1-2 times revenue in the deal.
jcrawshaw 12/5/2012 | 4:08:56 AM
re: Moto Buys Swedish Set-Topper Bure Equity has put out a release stating they sold their 4.9% stake in Kreatel for SEK40m. This values the company at SEK816m or US$106m. This is 2.9x 2005 estimated sales of $36m or $2.1m per current employee. By way of comparison Amino trades on 3.4x 2005e sales or $1.5m per employee.
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