Verizon Buys Intel’s OnCue

Verizon Buys Intel’s OnCue
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Verizon Communications Inc. (NYSE:VZ) makes it three in a row with its acquisition of the assets of Intel Media, an Intel Corporation (NASDAQ:INTC) unit developing Cloud TV products and services that enable the delivery of TV signals “over the top.”

The OnCue technology

Intel Media’s OnCue brand name includes a set-top box and delivery service capable of providing live as well as on-demand TV content on broadband internet, also referred to as “over-the-top.”

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Financial terms were not revealed, but Lowell McAdam, Chairman and CEO of Verizon Communications Inc. (NYSE:VZ), said, “The OnCue platform and team will help Verizon bring next-generation video services to audiences who increasingly expect to view content when, where and how they want it. Verizon already has extensive video content relationships, fixed and wireless delivery networks, and customer relationships in both the home and on mobile…We will have the opportunity to enhance, expand, accelerate and integrate our delivery of video products and services to better serve audiences on a wide array of devices.”

Over-the-top video delivery in Verizon’s crosshairs

In November 2013, Verizon Communications Inc. (NYSE:VZ) acquired Uplynk, a provider of a video streaming solution that works by simplifying the whole process of online video delivery, and uses a single adaptive format for all computers and devices. Uplynk had already secured a major customer in The Walt Disney Company (NYSE:DIS)/ABC prior to its acquisition by Verizon.

In December, Verizon Communications Inc. (NYSE:VZ) acquired Edgecast, a leader in the content delivery network space, to strengthen its video delivery and Web services capabilities. “Focused on performance, both companies deliver advanced video solutions and share a common architectural approach to video-optimized networks that results in quality experiences for enterprise customers who want to diversify their businesses and consumers that want content and media whenever and wherever they are,” said Verizon.

These acquisitions could help Verizon Communications Inc. (NYSE:VZ) integrate a web-based TV service with its FioS – a bundled Internet access, telephone, and TV service that runs on a fiber-optic communications network. Verizon says it expects to “further differentiate FiOS from traditional cable TV offerings and to reduce ongoing deployment costs.”

Intel’s priority shift

In an interview in early January, Intel CEO Brian Krzanich made it clear that he had a dim view of the prospects of OnCue, mainly because of the difficulties of sourcing content. “When you go and play with the content guys, it’s all about volume. And we come at it with no background, no experience, no volume,” he said at the interview, though he said the technology was very good.

He echoed these sentiments after the divestiture of OnCue, saying, “The critical factor in gaining efficient access to content is based on your ability to scale quickly in subscribers and end users, which is why selling these assets to Verizon Communications Inc. (NYSE:VZ) makes perfect sense, with its millions of FiOS network and wireless customers.”

The transaction will likely conclude in the first quarter of 2014, and OnCue employees will continue with Verizon Communications Inc. (NYSE:VZ). The unit will be run by the same management team and operate, as now, out of Santa Clara.

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