Last modified: February 1, 2001 12:30 PM PST
Sonicblue snaps up troubled ReplayTV
The purchase is part of Sonicblue's ongoing effort to remake itself from a graphics chip company into what Chief Technology Officer Andy Wolfe called a "digital media company for the connected home."
"Content drives everything we do now, and that means building the infrastructure needed to bring media into the home and manage it," Wolfe said. "We had music with our Rio products and interactive data with our Internet appliances. And now we have video, which was always part of our plan."
Santa Clara, Calif.-based Sonicblue will acquire ReplayTV for 16 million shares. Based on Wednesday's closing price, that amounts to $123 million.
ReplayTV will be a wholly owned subsidiary once the deal is approved by stockholders, which is expected to happen within the next 75 days.
At the end of November, Mountain View, Calif.-based ReplayTV announced it would stop making the digital video recorders itself and would focus on licensing its technology to cable providers and other TV-related companies.
A digital video recorder saves television shows to a hard disk drive, instead of onto videotape. TiVo is ReplayTV's main competitor.
According to Wolfe, Sonicblue will support ReplayTV's plans to license its technology to cable providers and other companies. But ReplayTV will eventually come out again with a digital video recorder, he said. Wolfe wouldn't comment further, saying plans were in the early stages. "We haven't even launched a product group within the company yet," he said.
Sonicblue also announced Thursday that it has signed an agreement to buy Sensory Science, a digital entertainment products company, for $8 million in stock.
Santa Clara, Calif.-based Sonicblue, formerly S3, sold its graphics chip business late last year to Via Technologies. It has been investing in products that, according to analysts, have long-term potential, including Internet appliances, MP3 players, home-networking devices and now digital video recorders.
Internet-appliance maker Frontpath is a wholly owned subsidiary of Sonicblue, which also owns the Rio line of MP3 players. Sonicblue also has a stake in the home-networking market with its Diamond line of HomeFree products.
Data from market researcher IDC indicates that Sonicblue's product categories have high growth potential. IDC estimates that annual shipments of digital video recorders will reach 12.9 million in the United States by 2004. Annual shipments of Internet appliances are expected to hit 40 million units, and home-networking devices are projected to ship 29.8 million by then. By 2003, shipments of MP3 players are anticipated to reach 10 million units annually.
On Thursday, Sonicblue also reported earnings for the fourth quarter.
Excluding numerous charges, Sonicblue reported a wider-than-expected loss of $37.1 million, or 40 cents a share, on revenue of $99.2 million. Two analysts surveyed by First Call had been expecting a loss of 27 cents per share.
In the same quarter in 1999, Sonicblue lost $6.9 million, or 9 cents per share.
Including the charges, Sonicblue reported a loss of $67.5 million, or 72 cents per share this quarter. The charges included amortization of goodwill, investment losses, losses from the Rioport music portal, "extraordinary" marketing expenses and costs related to exiting the graphic-chip business.