Motorola will expand its IPTV technology by acquiring all of the outstanding shares of Tut Systems’ common stock for $1.15 per share in cash. The two companies said the purchase price works out to approximately $39 million.
Tut Systems provides digital video encoding, processing and distribution products. Their solutions support MPEG-2 and MPEG-4 AVC video compression, local ad insertion, forward error correction, and real-time conditioning of video and audio.
The company claims more than 160 service provider customers worldwide are using its products. Earlier in the year, the Multimedia Research Group tagged Tut Systems as the global leader in IPTV headend equipment, ranked by number of video channels delivered. At the time of the study, Tut was broadcasting 14,000 channels, more than three times the amount of its next nearest competitor.
Tut Systems has so far found its greatest success with smaller telecom companies, including Cavalier Telephone and Smart City, and has scored several hotel deployments.
Absent any deal with a major customer, Tut Systems had been taking losses on revenue that consistently amounted to less than $10 million a quarter. The company’s need for financial stability only fueled speculation about its being a takeover target.
The company believes it has been on the cusp of a deal with at least one Tier-1 telco, however. At least two reasons have been offered for why such a deal has not materialized. Tut itself has cited customer indecisiveness. The analysts at ThinkEquity, meanwhile, have reported that Tut Systems has until recently been unable to deliver MPEG-4 set-top boxes in volume, due to circumstances largely out of the company’s control.
Indeed, ThinkEquity analysts had recently speculated either Verizon or AT&T might find it justifiable to buy Tut Systems outright.
Instead, Motorola, a supplier to both Verizon and AT&T, has purchased the company. The move is consistent with Motorola’s efforts to fortify its position in the IPTV market. Last month, Motorola bought IPTV CPE vendor Netopia.
Once the deal with Motorola is sealed, Tut Systems will operate as a wholly-owned subsidiary, integrated into the Motorola Connected Home Solutions business.
