Finance

Telstra Eyeing IPO for Ooyala: Report

Analysts Questions Video Unit's Growth Expectations 8/03/2015 12:15 PM Eastern Last updated at 8/03/2015 12:31 PM

Telstra, Australia’s largest telecom company, is preparing to take Ooyala, its Silicon Valley-based online video publishing and advanced advertising arm, public on the NYSE or NASDAQ exchange, The Australian reported.

 

“Our intent is to take the company public,” Ooyala CEO Jay Fulcher told The Australian, noting that the company beat its $65 million revenue forecast last year, but has yet to turn a profit. “Over time this will become a multi-billion market-cap business.”

 

Telstra, which recently partnered up with Roku on an upcoming streaming TV service, hasn’t announced when it might take Ooyala public (sometime next year is a possibility), but word of its plans come about a year after Telstra announced an additional $270 million investment that expanded its ownership stake in Ooyala to 98%

 

Ooyala’s been running as an independent business under Fulcher. Its customers include Vice Media, ESPN, Telefonica, Univision, Pandora, NBCUniversal, LG Electronics, Fox Sports, Tennis Channel, BYU TV, Newsy, and Park City Television, among others.

 

One analyst questions whether Ooyala is positioned to hit lofty growth targets that would exceed $1 billion in annual revenues.

 

“Be excited, but be realistic,” Dan Rayburn, EVP of StreamingMedia.com and principal analyst at Frost & Sullivan, surmised in this blog post about the plan. Citing a source at Telstra, he said Ooyala believes that it will drive $100 million in revenues for 2015.

 

“At the same time, Ooyala keeps talking about how they think their business can grow to do $1B in revenue in a few years, which isn’t realistic,” he said, pointing out that Brigthcove made the mistake of predicting growth targets it couldn’t match when it went public in 2012.

 

And while Ooyala sells into operators, which is not a key focus for Brightcove, “that alone is not enough to justify their market or revenue projections. Even if Ooyala grew revenue 50% each year, it would take them six years to get to $1B,” Rayburn said.

 

At the same time, he noted that he’s not “knocking Ooyala, Brightcove or any other video platform provider…I’m just as excited about the market opportunity as they are. But setting false expectations simply sets companies up for failure and is bad for the entire industry.” 

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