Ericsson has struck a deal to acquire Microsoft's Mediaroom business, a purchase that aims to shore up Ericsson's IPTV customer base and its ability to deliver of services to set-tops as well as tablets, smartphones and other mobile devices, while Microsoft looks to turn up the heat on its Xbox platform.
Ericsson didn't disclose the purchase price Monday, but said it expects to close the deal during the second half of 2013 and incorporate Mediaroom into its Business Unit Support Solutions division.
Mediaroom is based in Mountain View, Calif., and employs about 400 people worldwide. Ericsson employs more than 110,000 people. Ericsson and Microsoft announced the deal more than a week after Bloomberg reported that it was in the works, speculating that Mediaroom could fetch more than $1 billion.
But Ericsson apparently paid a lot less than that. Ove Anebygd, the vice president and head of TV at Ericsson, told Reuters that the purchase price was in the range of $99 million to $234 million.
Ericsson claimed the deal would give it a combined market share of more than 25%, noting that more than 22 million Mediaroom-powered set-tops have been deployed around the world in roughly 11 million subscriber households. Marquee customers of Mediaroom include AT&T U-verse, Deutsche Telekom, Telefonica, TELUS Optik TV and Swisscom.
"This acquisition contributes to a leading position for Ericsson with more than 40 customers, serving over 11 million subscriber households. In addition, Ericsson will be powered with senior competence and some of the most talented people within the field of IPTV distribution," Per Borgklint, senior vice president and head of business unit support solutions at Ericsson, said in a statement.
Ericsson appears poised to take over Mediaroom and to inject some new energy and resources into a platform that's been struggling lately. According to industry sources, some of Microsoft's pay TV partners have grown concerned about Mediaroom's lack of a solid features roadmap and the overall attention it's been giving to the platform. And it's lost some business: U.K.-based service provider BT moved off the Mediaroom platform last year, and has since turned to a video-publishing system from Comcast Corp. subsidiary ThePlatform to help power its IPTV service.
Microsoft said the proposed sale will allow it to plow more energy into its Xbox platform, which currently includes 76 million Xbox 360 consoles and 46 million Xbox LIVE members.
The deal "allows Microsoft to commit 100 percent of its focus on consumer TV strategy with Xbox," noted Yusuf Mehdi, the corporate vice president of marketing, strategy and business for the Interactive Entertainment Business at Microsoft, in this blog post. "With the sale of Mediaroom, Microsoft is dedicating all TV resources to Xbox in a continued mission to make it the premium entertainment service that delivers all the games and entertainment consumers want -- whether on a console, phone, PC or tablet."
Rather than striking out with its own subscription video service, Microsoft has instead forged partnerships with major pay TV operator and programmers to deliver authenticated live and on-demand video via the broadband-fed Xbox 360.