PCCW Japan Acquires Leading Online Entertainment Developer VR-1
February 23, 2001 07:01:00 AM ET
With VR-1, PCCWJ Secures Proven Network Gaming Solution and Mobile Applications Technology, Invests Additional $10 Million in Parent Company Circadence Corp.
TOKYO and BOULDER, Colo., Feb. 23 /PRNewswire/ -- Pacific Century CyberWorks Japan K.K. ('PCCW Japan') (Japan: 7954) today announced it has entered into an agreement to acquire VR-1, a premier developer of multi-user online gaming technologies and content applications based in Boulder, Colo.
Under terms of the deal, PCCW Japan acquires VR-1 in exchange for a private placement of PCCW Japan common stock valued at $38 million U.S. (JPY 4.4 billion). In a related transaction also announced today, PCCW Japan will invest $10 million into VR-1's parent company, Circadence Corp., to fund the company's commercial development of Conductor QoS, a comprehensive managed service designed to dramatically enhance the e-business experience.
Circadence President and Chief Executive Officer Michael J. Moniz described the deal as a winning combination that would enable both VR-1 and Circadence to focus on their core competencies in two distinct markets.
"VR-1 is an incredibly strong business unit with a successful team of talented and creative professionals. With its focus on the gaming and entertainment market, PCCW Japan will enable VR-1 to flourish as an entertainment leader while Circadence can focus on its e-business initiatives," Moniz said. "In addition, PCCW Japan's investment in Circadence is further validation of our e-business strategy and will enable us to focus on bringing our services to commercial market this spring."
Established in 1993, VR-1 is one of the world's leading developers of convergence games. It uses proprietary technology, known as Conductor SDK(R), to enable thousands of gamers to simultaneously play "massively multiplayer" interactive games over the Internet. Conductor enables gamers to enjoy real-time interaction in network games across most connection speeds, including those accessing the Internet through 28.8 kbps connections. VR-1 has a development studio in Boulder, Colo. with additional facilities in Tokyo, St. Petersburg, Russia, and Toronto, Canada.
A year ago, VR-1 changed its name to Circadence Corp. to better reflect the company's new direction into developing e-business applications and services using the core premise of the Conductor technology it developed for online games. VR-1 remained the company's entertainment unit and continued to solidify major deals, including contracts to develop games as a first-party developer on Microsoft's Xbox video game console and a middleware agreement for VR-1's Conductor on Sony PlayStation 2.
In making the announcement in Tokyo, Todd Bonner, President and CEO of PCCW Japan said, "The acquisition of VR-1 will provide PCCW Japan with technology that will significantly enhance the Jaleco gaming business we acquired in August last year and position us to become a leading global player in network gaming. We have exclusive rights to the entertainment applications of this technology and plan to leverage it as far as possible both within PCCW Japan and the broader PCCW group."
PCCW Japan sees huge potential growth in the network gaming area. With the rapid growth of broadband connectivity, the online gaming population is expected to increase from 10 million users today to 70 million, bringing in industry revenues of over US$8 billion in the U.S., Europe and Japan by 2005 according to AT Kearney.
VR-1's game portfolio spans multiple genres -- action, strategy, first-person shooter and role-playing -- for PC, console and online platforms. It has produced more than a dozen titles and is developing five more titles for release over the next two years.
"These games are some of the stickiest content on the Internet and they command recurrent subscription revenue," Bonner said. "We will continue to pursue acquisitions, partnerships and alliances which enhance our growth prospects in the online gaming space."
VR-1's proprietary technology, Conductor SDK(R), is a group of sophisticated tools and technologies that overcome the main technological hurdles of delivering compelling, dynamic content over the Internet. It provides a standardized network platform that allows for easy construction of massively multiplayer games and environments consisting of massive, simultaneous, online interaction. Under the terms of this deal, PCCW Japan obtains an exclusive license to Conductor for all video game applications.
VR-1's Conductor SDK(R) technology and compelling game designs have been licensed to leading software publishers and network providers across the world, including AOL, Hasbro Interactive, Sony, British Telecom, France Telecom, Deutsche Telecom and Samsung SDS. Microsoft signed with VR-1 to publish and distribute Fighter Ace, a massively multiplayer air combat game franchise, now at version 2.5. Microsoft also named VR-1 as a first-party developer for its upcoming release of the Xbox video game console in 2001.
VR-1's Japan division also uses Conductor SDK as a back-end server solution in the development of games to be played over WAP and Java cell phones and other mobile devices. It has 10 wireless games in development and memorandum of understanding with Panasonic for future i-mode initiatives in Asia. Combined with the acquisition of mobile content producer, B-Factory announced in December 2000, the Conductor technology will be used to further strengthen PCCW Japan's mobile capabilities in Japan and Asia.
"VR-1 is looking to leverage its technology and early mover status in the massively multiplayer game space to position itself for the emerging convergence of online and console gaming," said Tony Harman, president of VR-1 in Boulder. "We look forward to the enhanced opportunities for growth offered by PCCW Japan. We see them at the forefront of broadband content distribution and that is certainly a place we want to be."
Details of the Transaction
The purchase price of VR-1 is US$38 million, to be funded by the private placement of PCCW Japan common stock to Circadence. The total number of shares will be determined by dividing US$38 million by JPY775, converted into US dollars using the average USD/JPY exchange rates over a 60-day period.
The PCCW Japan shares acquired by Circadence are subject to a "lock-up" arrangement. The shares will be released from the lock-up in accordance with an agreed schedule commencing nine months after closing.
In addition, PCCW Japan has right of first offer on sale of any PCCW Japan shares by Circadence above a certain minimum share amount.
In a related transaction, PCCW Japan will purchase US$10 million of Circadence Series G preferred stock on terms and conditions to be mutually agreed by the parties.
About Pacific Century CyberWorks Japan Co., Ltd.
PCCW Japan K.K. (JASDAQ: 7954) is heavily focused on the development and delivery of games and targeted content across multiple distribution platforms. The Company has engaged in extensive driving broadband Internet content, infrastructure and distribution throughout the country via alliances and made significant investments in related companies including B-Factory, a leading i-Mode content supplier and Tomen Mediacom, one of the largest independent cable MSO operators in Japan. PCCW Japan was first established in January 2000 as the main vehicle to enter the Japanese market by PCCW Ltd. (Hong Kong: 0008; NYSE: PCW), one of Asia's leading integrated communications companies.
About Circadence Corp.
Circadence Corp., is a leading provider of enhanced Internet performance solutions. Circadence's state-of-the-art Conductor QoS provides e-businesses with a fully managed service that enhances web site performance, improves the predictability and efficiency of Internet-based content transmission, and allows for improved real-time customer interaction. Circadence is headquartered in Boulder, Colo. and has development facilities in Canada, Japan and Russia. For more information about Circadence and Conductor QoS, please visit www.circadence.com.
About VR-1
Based in Boulder, CO. with development facilities in St. Petersburg, Tokyo and Canada, VR-1 was founded in 1993 as the premier developer of massive multi-player online entertainment technologies and content applications. VR-1 is the entertainment division of Circadence Corp. VR-1's proprietary Conductor (R) application mitigates the limitations of the Internet by managing bandwidth more efficiently and reducing latency. For more information, visit www.vr1.com.
© 2001 PRNewswire
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