September 10, 2015
AMSTERDAM -- IBC 2015 -- Ericsson has revealed it will pay $125 million to acquire video-compression specialist Envivio and flagged a major new TV deal with US service provider AT&T.
Announced at this week's IBC show in Amsterdam, the deals represent important moves for the Swedish equipment giant in the fast-developing TV sector, a market Ericsson AB (Nasdaq: ERIC) looks increasingly determined to corner.
Headquartered in San Francisco, Envivio Inc. (NASDAQ: ENVI) has about 184 employees -- with most R&D staff based in France -- and serves about 300 customers globally, including AT&T Inc. (NYSE: T), Comcast Corp. (Nasdaq: CMCSA, CMCSK), Liberty Global Inc. (Nasdaq: LBTY), Sky and Telstra Corp. Ltd. (ASX: TLS; NZK: TLS).
Last year, the company made about $43 million in revenues -- a tiny fraction of the 228 billion Swedish krona ($27 billion) Ericsson generated in sales over the same period.
Nevertheless, Ericsson said the takeover would give it a real boost in the video compression market, allowing it to provide both hardware- and software-based video-compression technologies.
"We want to extend our leadership position in compression and combine hardware and software to address all possible use cases," said Elisabetta Romano, the vice president and head of solution area TV and media for Ericsson, during a press conference in Amsterdam Thursday morning. "We are already a leader in compression but we are going to make [our lead] even bigger."
Ericsson expects the takeover to close in the fourth quarter of 2015.
Want to know more about pay-TV subscriber trends? Check out our dedicated video services content channel here on Light Reading.
The vendor made several product announcements at IBC as well, including a software-based video-on-demand upgrade intended to make streaming video easier to deliver and Ericsson MediaFirst, a next-generation Pay TV platform.
The Swedish company also used the occasion of the IBC show to unveil details of several new customer deals, including a contract that looks aimed at helping AT&T shift its satellite and wireline TV services onto a single platform.
The ultimate goal is to develop a service that can operate across both U-verse, AT&T's fiber-based IPTV service, and the DirecTV satellite platform.
AT&T closed its $48.5 billion takeover of the satellite TV company as recently as July and provides TV services to millions of subscribers over two very different technologies.
Following the move for DirecTV Group Inc. (NYSE: DTV), AT&T promised to launch "new integrated TV, mobile and high-speed Internet offers that give customers greater value and convenience" and said it was keen to support the use of video services on multiple screens, including wireless devices, laptops and computers. (See What's Next for the New AT&T? .)
Clearly, Ericsson's technology could help AT&T to realize such objectives more efficiently, although Romano said the transformation of the operator's TV services would be a "challenging" project.
"We're putting in place all we need to succeed on this journey but it will not be easy and it will take some time," she told reporters at IBC.
Telus, Channel 5 join list of TV customers
Ericsson also announced new contracts with Canada's Telus Corp. (NYSE: TU; Toronto: T) and the UK's Channel 5.
Telus becomes the first customer for the vendor's new MediaFirst product, a cloud-based pay-TV platform designed to accommodate both traditional and over-the-top services.
Having conducted a successful trial of the MediaFirst technology, Telus plans to roll out the technology with its Optik range of TV services.
"People want to watch content on all types of devices today but you need a new architecture, bringing together the web and TV worlds," said Romano.
Among other things, MediaFirst should allow Telus to adapt services and introduce new features far more quickly than in the past.
The tie-up with Channel 5, meanwhile, will see Ericsson provide playout, media management, metadata, access and business continuity services to the UK broadcaster from May next year, and comes shortly after Ericsson announced similar playout deals with the British Broadcasting Corp. (BBC) and ITV plc (London: ITV), two other UK broadcasters.
Indeed, Ericsson has now carved out an especially strong position for itself in the UK's TV market, where it has also been working with fixed-line telecom incumbent BT Group plc (NYSE: BT; London: BTA) on the launch of pay-TV services.
Last month, BT claimed to have launched the first Ultra HD TV channel in Europe in partnership with Ericsson. (See BT Preps UHD TV Channel With Ericsson.)
— Iain Morris, , News Editor, Light Reading
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