Don’t let anyone tell you that Motorola is NOT going after the IPTV market. This week it added yet another encoder maker, real time H.264 specialist Modulus, to its list of companies in the sector, and it now has covered the set top, VoD server and home DSL equipment areas.
We stopped counting the number of times that we, and other IPTV market watchers, said that Motorola would eventually acquire Modulus Video, the IPTV encoder specialist that supplies encoders through Motorola to AT&T’s IPTV effort, as well as to Bell Canada and CenturyTel. But now it’s happened.
It’s not a significant enough event for Motorola, in terms of cash spend, to be forced to say how much it paid but given that Modulus employs around 57 people we reckon it is likely to have revenues of around $20 million p per annum or so, which means that if it enjoys the kind of premium that saw Tandberg acquired for $1.4 billion, that might mean a value up to $80 million. Modulus was always set up for a deal of this type. It was founded in 2002, and convinced Motorola to partner with it since 2005, from then on it was probably fated to be acquired by Motorola.
Already Motorola has bought Scandinavian IPTV set top pioneer Kreatel; Broadbus, which sells a VoD architecture that can be used for both cable operators and IPTV operators, based on massive amounts of cheap RAM; Tut Systems, an ailing encoder maker (it should have bought Modulus instead) and Netopia, a supplier of DSL modems, home gateways and wireless routers.
Missing from a full integrated architecture is a middleware software stack, which handles the entire set top function plus server side responses that are in the network, as well as a digital rights management system that works as conditional access for pay TV. While Motorola has its own conditional access system for US cable set tops, it is likely to acquire the finished AES style system by buying someone like Widevine, Verimatrix, Latens or Secure Media. Given that Cisco holds part of Widevine, that move is unlikely so Motorola may move shortly for one of the others.
The outstanding middleware play may be tiny Minerva, and again it is looking increasingly aligned with Cisco, and Motorola may decide to remain integrated with multiple middleware offerings, including Microsoft’s IPTV Edition rather than risk entering the software market.
Motorola may also now begin to move towards become a quadruple play supplier, aligning its IPTV and Cable offerings with delivery of audio, internet access and video to the handset, a move which may require yet more acquisitions.
‘Through this acquisition, Modulus Video will become part of a world-class organization in a highly strategic market segment. Our team will benefit from Motorola’s rich heritage and leadership of video delivery expertise,’ said Bob Wilson, Chairman and CEO of Modulus Video. ‘Modulus Video will bring to Motorola a software-centric platform that ensures flexibility, reduced cost and fast development time.’
Upon completion of the transaction, Modulus will be integrated into the Motorola Home and Networks Mobility business. Motorola intends to maintain Modulus operations in Sunnyvale, California.
Modulus took a gamble early on, that MPEG-4 AVC (or H.264 to give it its ITU name), would be the way the market goes, and it has always worked entirely with that standard, which has given it some of its edge.