TiVo To Buy Digitalsmiths For $135 Million

TiVo is looking to shore up its cloud-based service offerings and expand its customer base by putting up $135 million in cash for video discovery and recommendation engine specialist Digitalsmiths.

CEO Tom Rogers said the acquisition will play a role in boosting TiVo’s ability to commercialize and deploy TiVo’s cloud-based services platform, which is adding a cloud DVR to the mix, and to offer those services independently or in conjunction with TiVo’s user interface.

Digitalsmiths, which counts competitors such as Jinni and ThinkAnalytics, has developed search and recommendation engines that can run on multiple platforms, including set-tops, tablets, smartphones, PCs and gaming consoles. It claims to have deals with seven of the top 10 pay-TV operators in the U.S., which serve about 64% of the country’s pay-TV homes. The vendor said its cloud-based service handled 90 million transactions in July 2013, growing to almost 150 million in December 2013.

Digitalsmiths’ previously announced customers and deployment partners include Time Warner Cable, Cisco Systems, Warner Bros., Paramount, Technicolor, Univision, Roku, Xbox, Sony PlayStation, Sharp, Turner Sports, the National Basketball Association, the PGA, NASCAR, zeebox,  i.TV, and Australia’s Foxtel.

In an interview on Wednesday, Rogers said Digitalsmiths’ customers also include DirecTV and TiVo’s former foe, Dish Network. TiVo, meanwhile, is already working with about half of the top U.S. cable operators, as well as several on in Europe, including Virgin Media and ONO of Spain.

The acquisition, he said, opens up TiVo to  “a large number of [operators] in the U.S. and some international operators that we did not have relationships with.” He expects the deal to be EBITDA-positive for TiVo this year and to be a “material” contributor to TiVos’ 2016 fiscal year.

Founded in 2006, Digitalsmiths has raised about $31.5 million, according to TechCrunch CrunchBase data.

TiVo expects to close the deal by the first quarter of its 2015 fiscal year. Rogers said Digitalsmiths co-founders Ben Weinberger (CEO) and Matt Berry (COO) will be joining TiVo, and expects that an “overwhelming number” of Digitlsmiths employees will also join TiVo. TiVo, Rogers added, also plans to maintain Digitalsmiths’ presence in Durham, N.C.

With respect to future M&A opportunities that fill gaps or enhance TiVo’s platform, Rogers said TiVo will maintain its “cautious, balanced approach.”  Last year, TiVo was said to be among a small group interested in buying video software firm SeaChange International, which, so far, remains independent.

Separately, TiVo announced that it has increased its current stock repurchase authorization by $100 million, giving the company approximately $186 million of unused repurchase capacity. The company said it intends to repurchase $100 million during the first quarter of fiscal 2015.