Ho PoetTrader and All,
Thanks for this article, it solidified my strategy in this arena very nicely.
Good luck,
Eric
(Posted on the SFA thread)
Hi All,
Remember this article? Fortunes could be made...
Good luck,
Eric
Scientific-Atlanta plans software spin-off
By Jim Davis
Staff Writer, CNET News.com
January 13, 2000, 4:00 a.m. PT
TV set-top box maker Scientific-Atlanta is developing plans to spin off its software subsidiary in an IPO that could
present a threat to soaring interactive television companies such as Liberate Technology.
Scientific-Atlanta and PowerTV this week began serious discussions about taking PowerTV public, probably by the second half of
the year, according to several people familiar with the two companies' intentions. With formal planning at an early stage, however,
market conditions and other factors could affect whether shares in PowerTV are offered this year, one source close to both parties
cautioned.
PowerTV, which is 80 percent owned by Scientific-Atlanta, operates as an independent subsidiary that makes operating system
software for interactive cable set-top boxes. The company also makes software applications such as an email reader and Web
browser.
With the perception that Scientific-Atlanta is losing some momentum as Time Warner and other cable companies start to look at
rival equipment suppliers, sources speculated that the timing may be right for disengaging
PowerTV from the parent company.
"It certainly has been in their plans for a while," said Cynthia Brumfield, president of Broadband
Intelligence, a consultancy. "They have a separate board and an organizational structure that
makes it easy for them to be spun off."
Scientific-Atlanta declined to comment, as the company is soon to make its quarterly financial
report.
The Atlanta, Ga.-based company recently told financial analysts it might let PowerTV go public in
2000. The IPO successes of Liberate and OpenTV, two more interactive TV software companies,
and Wink have helped spur S-A's management into action, said sources.
Even if PowerTV only reaches a fraction of Liberate's $8.5 billion valuation, the boost for S-A could
be significant. Liberate's value is nearly twice that of S-A's $4.4 billion market capitalization, based
on S-A's share price of $56.38 at the end of regular trading yesterday.
PowerTV provides the operating software for S-A's Explorer 2000 set-top box, but the software is
capable of running on other boxes, including those from General Instrument. These boxes will be
used in Time Warner's cable system to make available services such as video-on-demand,
e-commerce, customized advertising, and eventually email and Web access.
To date, PowerTV claims it has shipped more than 1 million copies of its operating system and associated software to
customers.
"We still think that (one) of the things missing from some of those other companies is business fundamentals," said Bow
Rodgers, PowerTV's chief operating officer.
While Rodgers wouldn't comment specifically on PowerTV's financial plans, he did say, "Our story is not just about how we have
contracts and will later start shipping. We are shipping. Frankly, I think investors are getting leery of (Internet) plays without solid
business fundamentals."
Industry sources say that PowerTV, which is part-owned by its employees, has lately chafed at S-A's direction and is itching to
be free. "The (industry) perception is that they are hooked at the hip to S-A, while in fact they are not," said one source.
A fully independent PowerTV would be able to more actively pursue relationships with cable companies, said analysts, in much
the same fashion that Liberate was able to win equity stakes from the likes of Comcast and Cox Communications after it was
spun off from Oracle.
PowerTV may need to move fast to put its stake in the ground, however.
"Within the next 18 months, the key software providers will have marked their territories...At some point after large-scale rollouts,
there will probably be only one or two OS providers," following the same pattern of development as the PC market, analyst
Brumfield predicted.
An independent PowerTV would be going up against Liberate, Microsoft, OpenTV and others who aspire to be the technology
provider of choice to companies that are interested in interactive TV. That interest is peaking in light of this week's AOL-Time
Warner merger, because e-commerce over the TV could be a key new revenue source to make such costly mergers pay off. |
