Swedish telecoms equipment vendor Ericsson (STO:ERIC-B) has agreed to buy Californian video encoding firm Envivo (NASDAQ:ENVI) for US$125m to expand its TV solutions offering.
Swedish telecoms equipment vendor Ericsson (STO:ERIC-B) has agreed to buy Californian video encoding firm Envivo (NASDAQ:ENVI) for US$125m to expand its TV solutions offering.
The deal will help Ericsson meet growing demand for watching TV on multiple devices and networks, as it shifts its business away from costly hardware into software and services.
Founded in 2000 and listed last year, Envivo’s video convergence technology is used by tier one TV service providers such as British satellite broadcaster Sky.
It claims to power services for more than 300 providers around the world, including eight of the top 10 mobile operators, nine of the top 10 broadband providers and three of the top four US cablecos.
Julien Signès, Envivio’s founder and CEO, said: “Ericsson shares a similar vision for the future of video processing and shift to software defined and virtualised encoding solutions.
“Ericsson brings tremendous resources, a broad product and solutions portfolio and reach that will accelerate the adoption of Envivio’s software-based video solutions.”
The Swedish group is launching a US$4.10 per share cash offer for all of Envivio’s outstanding shares, and the deal is tied to a US$4.75m termination fee.
Entities affiliated with Crescendo Ventures, Sageview Capital and Harvourvest International Private Equity Partners, which own a combined 34% of Envivio, have already agreed to the offer.
If the transaction closes as planned in the fourth quarter of 2015, Envivo and its 200-strong workforce will become part of Ericsson’s TV and Media unit.
Envivo recently reported US$11.7m in revenues for the three months to 31 July 2015, compared with US$9.5m for the previous quarter. Its GAAP net loss for the second quarter of fiscal 2016 was US$0.6m, compared with $0.8m in Q1 2016.
Signès said the group was continuing to balance progress towards profitability with investing in innovation.
Ericsson posted second quarter operating profit and sales that were above market expectations on 27 July at SEK3.6bn (US$437m) and SEK60.7bn (US$7.4bn), respectively, lifted by a stabilising North American mobile business.
It got a further boost in the region last week when it announced that AT&T had picked it to upgrade its satellite and wireline TV platforms, helping the US telecoms giant integrate the assets of DTH firm DirecTV which it acquired for US$48.5bn earlier this year.
