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[ The Video Agenda ]
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The urge to merge
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by Mark J. Pescatore
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Sad but true, I cannot in good conscience be counted as one of the great minds of big business in the country today. I can probably trace this back to the fact that I grew up on a dead end street. As a result, the opportunities for a successful lemonade stand were out from the start, and my career, for better or worse, spiraled into the world of mass media.
Mind you, I have tried to stick my nose where it clearly doesn't belong. Despite the importance of keeping editorial separate from advertising, I have on occasion inquired about sales numbers for our magazine. When that happens, my publisher or the nearest salesperson pats me on my head, says they really appreciate my interest, then bets me I can't find the typo on page 24. Discussion averted.
To be fair, I get the whole profit and loss thing. Supply and demand makes sense, too. I even understand that sometimes you have to spend money to make money. If the conversation gets much deeper, however, my eyes start to glaze over and I immediately start looking for a glass of lemonade.
Expanding Markets
Many of us entered the world of video production because of the creative opportunities, or at the very least to avoid composing profit and loss statements for the rest of our professional lives. But even if you have less than a passing interest in the business world, recent acquisitions within the video industry may have peaked your interest.
On Aug. 31, Harris Corporation announced its intention to acquire all the shares of Leitch Technology Corporation, a deal that should be finalized before you buy your Thanksgiving turkey. The announcement was made just prior to IBC, an annual industry convention held in Amsterdam (Europe's version of NAB).
Howard L. Lance, chairman, president, and CEO of Harris, is understandably excited about the merger. "Our products are very complimentary with each other, with limited overlap," he said during a conference call to announce the deal. As it turns out, Leitch recently made a couple of acquisitions of its own, Videotek and Inscriber, which expanded its own product offerings. Lance added that Leitch has successfully accomplished a financial turnaround and that its brand is "clearly undervalued."
Even to a business novice, the Leitch acquisition by Harris makes sense. Leitch's products will allow Harris to compete in a larger part of the broadcast market by expanding its content operations and delivery solutions, as well as adding content creation products and software. Sure, the company is still missing ready-for-primetime production switchers and cameras, but it's a solid move toward sticking its corporate fingers in every piece of the production pie.
The management team at Leitch is "doing a lot of things right," and is expected to remain with the business, Lance noted. He doesn't expect any major changes in operations when the company is acquired. Nice to hear that Harris is keeping the personnel that made the Leitch acquisition so attractive.
Rules Of Acquisition
Earlier this year, another big buy created buzz on the NAB show floor, as Avid Technology announced its plans to acquire Pinnacle Systems (see Government Video, April 2005). The acquisition was completed in early August.
A couple of weeks ago, I talked with Steve Gray, vice president of Avid's corporate marketing. He said the Pinnacle acquisition was smart because it was complimentary to existing operations. "That's where you find the best matches," he added.
In this case, Avid was clearly aiming for the consumer video business. As Gray explained, a portion of amateur video enthusiasts will one day make the move into the professional world. Get 'em young, keep 'em loyal.
Of course, on the professional side, Avid gains Deko on-air graphics and the MediaStream playout server, as well as Liquid NLE software. Not a bad bonus.
These acquisitions seem fiscally responsible and all that kind of fiduciary shareholder stuff, but how does this benefit you? Only time will tell, of course, but combining the intellectual properties toward a more common goal could result in tighter integration between products, improved research and development, improved stability in product lines, maybe even lower prices.
The common theme of these acquisitions is complimentary products. A big company didn't swallow a little company in an effort to reduce competition. Instead, a big company saw an opportunity to expand its market share. And even to a video guy, that's good business.
Mark J. Pescatore is the editor. Contact him at mpescatore@cmpinformation.com.
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