It was as early as February 2007 that we published the headline, ‘Kasenna and Bitband rounding up potential buyers,’ and now Kasenna, disappointingly has found its buyer in tiny Canadian set top applications company, Espial.
The IPTV market has been slow for traditional suppliers since Microsoft entered the market in 2004, and has really only just opened up again in the last 12 months. As a result some of the smaller IPTV specialists have shrunk out of all recognition to their reputation and technology and we’re afraid that is true of both these two companies.
Espial began life offering a browser to run on set top boxes and made good progress bundled into the Myrio system which was acquired by Siemens, and is now part of Nokia Siemens, and has major installations at Belgacom, KPN and NTT in Japan. Since then it has diversified into IPTV middleware on both set tops and servers, offering a multicast carousel, which delivers everything from the EPG, to advertising, to content search capabilities and customer support applications.
Espial also offers its browser as a menuing system for Hitachi TV sets, and has 3 million installations in the hospitality market through Lodgenet and On Command.
Kasenna began life as a VoD server supplier, then added middleware and set tops, and thought it had hit the mother lode when it cut a distribution deal with Ericsson a few years ago, but this has so far resulted in no new deals for the company.
Espial now has a definitive agreement to acquire Kasenna and will issue 4.7 million new common shares, giving Kasenna shareholders 33.6% of the enlarged equity. As far as we can see no money is changing hands and this is really about two old timers in the IPTV market merging to keep their installed bases intact so that perhaps a bigger and better roll-up deal can be found that will take in both of them. The last capital injection we can find for Kasenna was back in 2006 when it raised $11 million in a VC round led by Intel Capital.
Kasenna has customer wins at Cavalier Telephone, Charter Communications, Fastweb, and SaskTel and was originally a division of Silicon Graphics.
Currently the only independent IPTV middleware operator that appears to be thriving is Minerva Networks in the US, and perhaps the Scandinavia DreamPark. Seachange International, a rival to Kasenna which also began as a VoD player (for cable) and branched out into IPTV including middleware has also gone very quiet of late, while Israel’s Bitband has been holding out for a merger deal for at least two years. Orca, the Israeli middleware specialist took at deal at France Telecom’s Viaccess DRM subsidiary in March.
‘Video services are critical for service providers’ success worldwide. The combination of Espial and Kasenna strengthens the leadership position of Espial in the IPTV, hybrid IP-DVB and hospitality segments’, noted Jaison Dolvane, CEO of Espial. ‘The IPTV market remains early and fragmented, and service providers are looking for clear leaders that they can bet on. Acquiring Kasenna provides us with increased scale, expertise, product breadth and channel access to position ourselves as the leading choice for service providers worldwide’.
The statement about the merger talked about increase in Tier 1 telco reach, a 100 customer footprint, 2.4 million IPTV licenses, broader channel relationships with equipment vendors and system integrators, a larger sales force and a differentiated best-of-breed technology with a strong patent portfolio.
But given that the surviving player had first quarter revenues of just 1.2 million Canadian dollars compared with revenues around 1 million Canadian dollars higher this time last year, with a substantial operating loss and a net loss of almost 1.8 million Canadian dollars, it is only the cash of $14.5 million Canadian that Espial holds, which offers any future hope.