Trying to sort through the various players — public and not-yet-public and getting-ready-to-go-public — in the general arena of IPTV is like trying to straighten out a plate of spaghetti. If there is any industry segment that is likely to light up the IPO sky whenever IPOs come back, IPTV might be it. The number of smart-looking little companies that claim to have both partners and technology is dizzying. What it says to me is that there is a lot of talent in this business, and there is probably a business in this business too.
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There are way more nonpublic companies than public. If you look at some of the more visible public companies, they would include Dubai- and NYC-based KIT Digital (EBB: KDGL, http://www.kit-digital.com), which includes names that are recognizable to people who have prowled around this territory: The Roo Group, Narrowstep (assets only), and others. A triple-play competitor with a foot in each of 3 methods of dissemination, KIT Digital may also be the only player in this space that seems like it may be poised to (a) break even on cash and (b) be profitable some time soon, leaving aside acquisition write-offs, since KIT has been an active acquiror. KDGL shares are trading at $8.75 vs a 52-week high of $15.40 (there was a reverse split that creates anomalies in pricing), on fairly low volume of 7,000 shares and a market cap of about $40 million.
Pompano Beach, FL-based Onstream Media (Nasdaq: ONSM, http://www.onstreammedia.com/) is another “familiar” name, but seems like it may be slipsliding these days, according to their update news release dated April 22. They apparently backed out of an announced acquisition of the remains of tech innovator, Narrowstep, allowing KIT to pick up the choice piecese, and leaving the corporate shell behind with David McCourt, who is now seeking damages for the breakup. Then ONSM raised a fairly draconian $750,000 to $1 million in loans with the first repayment due in 2 weeks, and interest at 12%, as well as 1.5 million shares. ONSM has also been notified that it is liable to suspension from Nasdaq. Nonetheless, ONSM claims illustrious customers like AXA Equitable, BT, Dell, Disney, MGM, PR Newswire and even Shareholder.com (part of Nasdaq), so it is not to be discounted. Its shares are trading at $0.26 vs a high of $1.03 on average volume of about 62,000 shares and a market cap of about $11.3 million.
There are various players in the device side of the IPTV business, including Plano, TX-based ViewCast Inc* (EBB: VCST, http://www.viewcast.com), which makes products that capture, digitize and manage content. In spite of reporting net income for 2008 (which becomes negative with dividend payments, complicated, but not troublesome), ViewCast is selling for a discount to last year’s revenues of $17.4 million, with VCST shares at $0.34 vs a year-high of $0.54 and a market cap of $12 million. Current ratio of almost 3:1, and cash in the bank. Go figure. If you wanted to see a privately held company in an allied area, you could look at Canada’s Markham, ONT-based Digital Rapids, http://www.digital-rapids.com or Australia’s Vividas (http://www.vividas.com).
Clifton Park, NY-based On2 Technologies (NYSE Alternext: ONT, http://www.on2.com/) is in the video compression biz too, and its shares trade very robustly at $0.36 — average volume of 500,000+ shares, for a market cap of $62 million. Clearly a lot of fans, even though the stock is about a third of its year-high of $1.06. Santa Clara, CA-based MacroVision (Nasdaq: MVSN, http://www.macrovision.com/) is a much larger company in this space, market cap of $2.1 billion, stock price of $21.10 (a new 52-week high today).
The swarm of smaller companies is impressive — and hard to find out much about. Most of them present themselves on their websites as virtual — it is frequently hard to figure out where they are based. They include Atlanta-based Endavo (http://www.endavomedia.com); NY-based Verticom (http://www.verticom.tv), which is the current location of former Narrowstep Pres Carolyn Wall; Mountain View, CA-based Verismo Networks (http://www.verismonetworks.com); NY-based NextNewNetworks (http://www.nextnewnetworks.com); EQAL (http://www.eqal.com) — about which see this burbly HuffPo article: http://www.eqal.com/2009/04/30/the-future-of-entertainment-eqal/. It would continue with NY-based BlipTV (http://www.blip.tv), which has a homepage that is worth seeing for its entertainment value. And of course there is the seemingly UK-based Babelgum (great name, right? http://www.babelgum.com), and another familiar name, Joost (http://www.joost.com). There are lots more of these small nonpublic companies, including the tantalizingly named ZillionTV (http://www.zilliontv.tv), and they should start to pepper us with reverse mergers, VC investments and IPOs over the next couple of years, that is, if they survive and no one buys them first.
The M&A and investment banking opportunities seem virtually endless, and some of the banks to watch on these deals are BMO Capital Markets, Merriman Curhan Ford, and Jefferies Inc. But there are lots of others too. And notice that I wrote this whole article without mentioning Hulu and YouTube (until now). LOL.
*Allen & Caron client