Telecom equipment maker Ericsson (ERIC) said on Monday that it has come to terms with Microsoft Corp. (MSFT) to buy its television solution Mediaroom business, making Ericsson the leading provider of Internet Protocol Television, or IPTV, with a greater than 25 percent market share.
Microsoft Mediaroom is the TV technology behind many of the world's leading television service providers like AT&T (T) U-verse®, Entertain of Deutsche Telekom, Telefonica, TELUS Optik T and Swisscom.
No purchase price was disclosed. Cross Research estimated in March, when it was reported that the two companies were in discussions about a sale of Mediaroom, that the business could be worth in excess of $1 billion.
Ericsson said in its announcement that the global IPTV market will generate about $32 billion in 2013 with sales expected to rise to $45 billion in 2015. With competition from Over The Top, or OTT, cable companies and more, there has been some open debate over the expansion of the industry.
"Ericsson's vision of the Networked Society foresees 50 billion devices to be connected via broadband, mobility and cloud. Future video distribution will have a similar impact on consumer behavior and consumption as mobile voice has had. 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," said Per Borgklint, Senior Vice President and Head of Business Unit Support Solutions at Ericsson.
Microsoft’s Mediaroom, which makes software used by phone companies to deliver television over the Internet, is headquartered in Mountain View, California and employs more than 400 people globally. Sales have remained relatively stable for the past three years around $350 million annually.
It is expected that Microsoft will remain focused on further expansion of its Xbox gaming system to deliver Internet television.
Shortly after the opening bell, shares of Ericsson are essentially flat on the day with the news, trading ahead by one penny at $12.12. Microsoft is lower by 7 cents at $28.64 as the markets in general are struggling for traction. The Dow, S&P 500 and Nasdaq are all in the red.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer