Open TV has ‘strategic challenges’ says Kudelski

Rose Major

Kudelski Group has accused Open TV’s board of not acting in shareholders’, customers’, partners’ and employees’ best interests in rejecting its takeover offer, adding that the company faces “serious strategic challenges” in the future.

But while Kudelski is withdrawing its offer, the company will remain as Open TV’s controlling shareholder, although its plan to integrate Open TV and Nagravision is now unlikely to go ahead.

A statement yesterday from Kudelski, following the previous day’s rejection of the US$1.35-per-share takeover, accuses the Open TV board’s Special Committee of relying “exclusively on an overly optimistic an unrealistic outlook on both Open TV’s future business prospects and the business as a whole.”

It continues: “The Special Committee does not adequately take into account the economic impact of such challenges on the value of OpenTV and greatly discounted the scope and magnitude of the measures required to mitigate the risks faced by OpenTV. For example, Kudelski believes that the Special Committee’s assessment does not adequately take into account the impact of the market trends towards next generation set-top box software solutions, and the resulting significant decrease of OpenTV’s business volumes in a stand-alone scenario.

In addition, while Kudelski acknowledges the value of the OpenTV customer franchise and human capital, it also believes that it is vital for the long-term development of OpenTV business to significantly ramp up its investment, even at the expense of short term profitability.”

The statement says that Kudelski’s concerns over the future of the business have been voiced previously. Kudelski owns 26.7% of Open TV’s equity but nearly 75% of the company’s voting shares and plans now to push for a different strategy for Open TV through its board representation.

Kudelski’s plan is for Open TV to substantially increase its investment in next-generation solutions, “mainly organically but also potentially through acquisitions”. That, says Kudelski, will require a substantial portion of Open TV’s cash resources, likely to depress the company’s financial performance and thus presumably its share price. “Without such investments,” Kudelski warns, “the long-term viability of Open TV’s business as a stand-alone entity is seriously in doubt.”