News Corp run BSkyB, the leading UK DTH supplier has gone and bought one of its set top box makers in an inexplicable deal that has probably been carried out more on sentiment than sense.
BSkyB and all the News Corp run and partially owned satellite TV services around the world, control their own set top definitions, usually through Israeli UK based News Corp subsidiary NDS. It uses some OpenTV middleware, and Gemstar EPG patents and many other suppliers including Pace Microsystems, Thomson and Humax have a piece of this business both in the UK and at Sky Italia.
Amstrad buys off the shelf Conexant video processor chips, so there’s no key advantage there. The $250 million price tag also seems generous given that the set top maker is entirely dependent upon News Corp business to survive, and the price could have been crushed by withdrawing its business and then moving in, a trick that News Corp run businesses are not squeamish about and which was tried on US DVR inventor TiVo, which only really survived by attracting cable operator business.
The likely outcome of this deal is that when set tops next goes through a significant technology hurdle, the in-house Amstrad will be left behind by external suppliers and the deal will be unraveled. We would not be at all surprised if the remains of Amstrad were not eventually offloaded to such a rival, like UK based Pace Micro.
The offer made last week while we were on a Summer break is a premium of 24% on the closing price of Amstrad shares, the day before the deal was announced.
It is almost certainly a waste of money and although news was leaked of a dual tuner DVR being introduced by Amstrad, there’s nothing essentially from Amstrad here, and this is about the cosy retirement of Sir Alan Sugar, who built the Amstrad empire (its name stands for Alan M Sugar Trading) which began life in music equipment manufacture and then traveled through word processors and PCs to set tops, where the bulk of its revenue is today.
Sky has irrevocable acceptance from the Amstrad Directors, and some other shareholders for about 45% of the equity and to all intents and purposed this is a done deal. During the past year Amstrad made around 30% of the set-tops for Sky, which accounted for 75% of Amstrad sales.