Telstra said it will recognize an impairment charge as it writes down its investment in Ooyala, the struggling online video firm that the Australia-based company acquired in 2014.
Telstra, in an announcement to the Australian Securities Exchange on February 2, noted that the non-cash impairment and write-down will carry the value of Ooyala, which has been serving as its U.S.-based video tech business, to “zero.” As a result Telstra said it expects to recognize an impairment charge of A$272 million (US$215 million).
Telstra acquired 9% of Ooyala in 2012, and raised it to 98% in 2014 as it tried to take advantage of the surging online video trend.
Telstra said it identified “challenges” in that business 18 months ago and impaired the Ooyala business at the time of its 2016 financial results, but continued to make efforts to turn around Ooyala’s business.
Last April, Ooyala tapped Jonathan Huberman as CEO, a move that came about five months after former CEO Ramesh Srinivasan left the company. Huberman also came on board a couple months after Ooyala had reportedly laid off 14% of its workforce amid a restructuring that, it hoped, would lead to new jobs and product areas.
Ooyala’s business has been focused on three areas: ad tech, online video players and a workflow management system.
Ad tech, “has not performed well and we will therefore seek ways to exit that part of the business,” Stephen Elop, the group executive, technology, innovation and strategy at Telstra, and the chairman of the Ooyala board, said in a statement.
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He added that Telstra does “see a future in other core parts of the Ooyala business,” namely the video player and workflow management components, but later stressed that the company “will remain alert for broader strategic options for Ooyala in a market fragmented across multiple providers.”
That market is made up of a mix of different sized tech players that focus on different parts of the multiscreen video ecosystem, including Comcast Technology Solutions, Amazon, Brightcove, IBM, NeuLion, Disney-backed BAMTech, Zype, and Kaltura, among several others.
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Telstra, Elop noted, acquired Ooyala “when the market dynamics were very different…When we announced the initial impairment 18 months ago we indicated that we would be working closely with the team to turn around the performance. We believed Ooyala remained a young and exciting company with leading offerings in intelligent video which were continuing to evolve and scale. While some of these initiatives have been successful, the market has continued to change.”
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