Eric­s­son plans buy­ing Mi­crosoft’s soft­ware unit

The Pak Banker - - 6BUSINESS -


Eric­s­son AB (ERICB) is in talks to buy Mi­crosoft Corp. (MSFT)’s IPTV busi­ness, which makes soft­ware used by phone com­pa­nies such as AT&T Inc. (T) to de­liver tele­vi­sion over the In­ter­net, peo­ple with knowl­edge of the mat­ter said.

The trans­ac­tion could be an­nounced in a few weeks, said one of the peo­ple, who asked not to be iden­ti­fied be­cause the dis­cus­sions are pri­vate.

Eric­s­son, the largest maker of wire­less net­works, is seek­ing to cater to phone com­pa­nies that are com­pet­ing with ca­ble, satel­lite and Web-based providers. The move will also help Eric­s­son step up its em­pha­sis on soft­ware and ser­vices amid ac­cel­er­at­ing com­pe­ti­tion in hard­ware. Mi­crosoft, the big­gest soft­ware maker, in­tends to fo­cus on de­liv­er­ing TV through its Xbox game con­sole, a per­son fa­mil­iar with its plans said.

“As a bolt-on ac­qui­si­tion, this would make sense for Eric­s­son as it pro­vides for a more com­plete of­fer­ing,” said Alexan­der Peterc, an an­a­lyst at Ex­ane BNP Paribas. “Still, the tech­nol­ogy started to get hyped about 10 years ago and may have reached its peak al­ready so I don’t see this as a growth mar­ket.”

IPTV al­lows tele­com car­ri­ers

to have a voice, broad­band and TV of­fer­ing al­low­ing them to com­pete with ca­ble com­pa­nies and over-the-top ser­vices like Netflix, which are in­creas­ingly pop­u­lar for broad­band users, Peterc said.

Kathy Egan Wum­mer, a spokes­woman for Stock­holm-based Eric­s­son, didn’t re­spond to re­quests for com­ment. Melissa Havel, a spokes­woman for Red­mond, Washington- based Mi­crosoft at Waggener Ed­strom, de­clined to com­ment.

Mi­crosoft be­came a leader in the mar­ket for In­ter­net-TV soft­ware in the past decade as phone com­pa­nies ramped up ef­forts to woo TV sub­scribers to grab share from ca­ble com­pa­nies, such as Com­cast Corp. (CMCSA)

The sale of IPTV, which Mi­crosoft calls Me­di­a­Room, marks a strate­gic shift, said Colin Dixon, chief an­a­lyst of nScreenMe­dia, a dig­i­tal me­dia con­sul­tant.

“Me­di­a­Room has gone from be­ing a cen­ter­piece of Mi­crosoft’s TV strat­egy to a kind of sideshow,” Dixon said.

AT&T, the largest U.S. tele­phone com­pany, uses Mi­crosoft’s IPTV in UVerse, which com­bines tele­vi­sion with other com­mu­ni­ca­tions ser­vices, such as In­ter­net ac­cess. AT&T had 4.5 mil­lion UVerse video sub­scribers at the end of 2012. Mi­crosoft has fo­cused in re­cent years on de­liv­er­ing TV- re­lated en­ter­tain- ment ser­vices via its Xbox con­sole, strik­ing distri­bu­tion deals for Xbox Live with such part­ners as Vi­a­com Inc. (VIAB) and Walt Dis­ney Co.’s ESPN.

Eric­s­son shares rose 0.9 per­cent to 81.95 kro­nor in Stock­holm at 9:17, and it has climbed 26 per­cent this year. Mi­crosoft closed at $28.16 in New York yes­ter­day; it’s ad­vanced 5.4 per­cent since the be­gin­ning of the year. Sep­a­rately, Eric­s­son said to­day it fin­ished its planned re­duc­tion of its busi­ness in Swe­den. It cut 1,399 po­si­tions, ac­cord­ing to the state­ment, and the 1.5 bil­lion kro­nor ($231 mil­lion) in re­struc­tur­ing costs will af­fect the com­pany’s first quar­ter re­sults.

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