Web TV fuels merger and acquisition frenzy

Analyst firm iSuppli estimates that, at stake for these manufacturers, is a global market for IPTV telco equipment that is expected to grow to US$22.1 billion (A$26 billion) in 2011, up from US$9 billion (A$10.9 billion) in 2007.

"The OEMs are styling themselves as one-stop IPTV shops because of the telcos' lack of experience in video," said iSuppli principal analyst for networking and optical communications, Steve Rago.

"To make up for this inexperience, the telcos require equipment suppliers that can address all aspects of a video network."

In order to acquire a complete portfolio of IPTV products and technologies, the tier-one OEMs are engaging in a spate of mergers and acquisitions, the analyst explained.

"Many of the tier-two OEMs, which are having difficulties in establishing beachheads in the IPTV market due to the telcos' desire for end-to-end solutions providers, are more eager to enter into mergers or strategic alliances with tier-one suppliers," said Rago.

Leading this "mergers and acquisitions frenzy" is Ericsson in the US, which is positioning itself as a complete IPTV supplier with its purchase of Marconi in 2005, Redback Networks and Entrisphere in 2006 and its current pursuit of Tandberg TV.

Carl-Henric Svanberg, president and chief executive at Ericsson, stated at the firm's annual general meeting that IPTV will have a transformative impact on telecoms networks.

However, iSupply noted that Ericsson is not alone in its pursuit of IPTV business, as Motorola has purchased Netopia, Tut Systems and Vertasent and has forged an alliance with ECI Telecom.

Cisco Systems has followed the same path with its purchase of Scientific-Atlanta, Linksys and Arroyo Video Solutions, a maker of video-networking software.

Meanwhile, Nortel Networks has taken a different approach in broadening its IPTV portfolio by entering into an agreement to jointly develop middleware for the market with pay-TV software firm NDS.

Lucent merged with Alcatel to form Alcatel-Lucent during the same period, while Siemens and Nokia proceeded with their planned merger, creating another potentially powerful competitor.

iSuppli expects the mergers and acquisitions activity to sustain its fast pace in 2007 as OEMs continue to round out their IPTV product portfolios.

The focus in 2007 will be on middleware, video-on-demand and possibly video encoding, the analyst firm predicts.

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