OpenTV Gathers Up ITV Outfits

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It appears Liberty Media Corp.'s newly acquired interactive-television assets will be melded together under the OpenTV Corp. roof.

In a pair of transactions announced last week, OpenTV — in which Liberty Broadband Interactive Television holds controlling interest — is acquiring interactive software provider ACTV Inc. and interactive advertising outfit Wink Communications Inc.

LBIT had agreed to buy ACTV in April, but the two companies recently said they would amend the purchase agreement to lower the price tag. Now, OpenTV will assume that buyout in a stock-for-stock merger, subject to shareholder and regulatory approval.

Separately, OpenTV will buy Wink, which LBIT acquired in August. It will pay LBIT approximately $101 million in cash, which is roughly equal to the price LBIT paid for Wink.

The upshot: The two transactions will pool all of Liberty's ITV properties under the OpenTV banner. Although some might suspect that was always the plan, the deals arose within a matter of days, according to OpenTV CEO James Ackerman.

"There was a discussion among the OpenTV board directors the other day, and also separately with Liberty Broadband and Liberty Media itself, about what's the best way to get the greatest amount of efficiency and greatest market product offering," Ackerman said. "The view was put the three things together is the best way to achieve that."

The driving rationale is to bolster efficiency by eliminating duplication of management and product offerings — not to mention unifying quarterly earnings reports from three publicly traded companies. With ACTV and Wink, OpenTV will have about $160 million in cash, no debt and a global customer base of more than 35 million homes using its ITV products or services.

There will likely be consolidation-related layoffs. OpenTV had previously announced that it was undergoing a major restructuring, and that process is near completion, Ackerman noted.

"One of the things we are doing is we are thinking about how that restructuring will look, in light of this structure versus OpenTV on a pure stand-alone basis," he said.

Execs' fate unknown

It is too soon to tell whether the respective top leaders — including Wink CEO Maggie Wilderotter and ACTV CEO David Reese — will remain after the three companies are combined. OpenTV can close the Wink deal fairly quickly, but the more complicated ACTV acquisition process means that deal likely won't close until the end of the year, Ackerman said.

If it does go through, the consolidation may give OpenTV greater reach in a still-struggling ITV market. Thus far, OpenTV's main U.S. client is direct-broadcast satellite provider EchoStar Communications Corp. At last estimate, its technology was deployed in 5 million Dish Network homes.

Wink also has deals with EchoStar and DirecTV Inc., and cable operators Comcast Corp., Charter Communications Inc., Adelphia Communications Corp. and Time Warner Cable.

"I think when you put the two together, you now suddenly have a company whose U.S. presence is significantly expanded beyond where OpenTV was by itself," Ackerman said.

The lure for ACTV is its patent portfolio for advanced interactive applications. The combined company will boost OpenTV's patent holdings from 38 to more than 70 U.S. titles, plus 160 international patents and 600 patents pending worldwide.

When LBIT acquired controlling interest in OpenTV back in April, the company refocused by expanding its product portfolio beyond its core middleware. That process will continue once Wink and ACTV are in the mix, upping the company's revenue-generating potential, Ackerman said.

"We've been changing the company through a very difficult market with an economic downturn," he said. "But the concept has been we have the ability to take our expertise, our technologies and our developments to create a much richer experience for our clients — to bring a more end-to-end solution to our clients, where they can come to OpenTV on a kind of one-stop-shop basis."

While U.S. cable operators are not adopting ITV applications as quickly as once was anticipated, OpenTV's international contracts have helped, Ackerman said. Wink has gained wide U.S. deployment, including a recent campaign launched with retail juggernaut Wal-Mart Stores Inc.

"It is becoming meaningful because Wink is now deployed to millions of households," Ackerman said. "On one level, things are actually starting to open up quite a bit. EchoStar has begun rolling out interactive applications through a portal they've created, and that is available to the whole subscriber base.

"So bit by bit, it is all actually starting to come together."

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