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Liberty Media Shifts iTV to High Gear

By Erin Joyce

Liberty Media Corp. is shifting into high gear with its interactive television strategy, acquiring control of OpenTV Corp. for $185 million in cash and stock.

In addition, the company controlled by deal-making mogul John Malone formed a subsidiary to pursue broadband interactive television developments; it also entered into a deal to acquire interactive television company ACTV for $2 a share.

With many television technology stocks at depressed prices, and interactive services catching on with cable subscribers, Liberty Media is apparently positioning itself at what analysts might call "attractive levels."

Shares of OpenTV, whose interactive television software sits in more than 24 million set-top boxes worldwide, had jumped by 92 cents, or 20 percent to $5.35 after the news was announced.

ACTV was up by 57 cents, or 51 percent to $1.70 Wednesday.

At the same time, Liberty Media formed a subsidiary, Liberty Broadband Interactive Television, Inc. (LBIT), and named Peter C. Boylan III as its president and chief executive.

In addition to managing the OpenTV investment, Boylan is to focus on developing and investing in the interactive television sector, said Liberty, which holds 90 percent control of LBIT.

"The iTV sector along with other technology areas have been out of favor with investors for the last few years, creating a unique opportunity for us at this time," Boylan said in a statement.

"I firmly believe that with Liberty Media we can create substantial shareholder value in this sector while forging new, mutually beneficial relationships and partnerships with multi-channel video providers and programmers seeking to enhance their existing applications, traditional advertising business and associated revenue streams."

Liberty Media and Boylan have been rubbing elbows in the broadcast/technology sector since 1995 when Liberty invested in United Video Satellite Group, the forerunner of TV tech company Gemstar TV-Guide International . Boylan recently resigned from his positions as co-COO and co-president with Gemstar.

The Englewood, Colorado-based Liberty, which invests in broadband and communications businesses, said it agreed to acquire 365,460 Class A Shares and 30.2 million Class B shares of OpenTV Corp. The shares are held by MIH, which invests in and offers interactive services to overseas customers.

Once completed, the OpenTV deal would give Liberty Media over 46 percent ownership and 89 percent of the voting shares in the Mountain View, Calif.-based company. Under the terms of the letter agreement with ACTV, Liberty (which currently owns about 16 percent of the New York-based ACTV's outstanding shares), would purchase all remaining shares for $2.00 each.

With about 55.8 million shares of ACTV's common stock outstanding, the deal could be worth roughly $92 million. But the companies said there were no assurances that the boards of directors would approve the tender.

The Boylan connection to the Liberty stake is important, said Phil Swann, president and publisher of TVPredictions.com, a news and analysis site about the industry. Boylan's prior experience with Gemstar leads to Rupert Murdoch's News Corp., which has major stake in Gemstar. "And Murdoch is a huge supporter of iTV," Swann said.

That's one reason he thinks Liberty's moves could put other downtrodden iTV companies in play, notably personal video recorder company TiVo and iTV software company Wink Communications .

"Look at TiVo, which is now around $4 (per share) after burning a lot of cash," he said. And shares of Wink Communications have seen "more swings than Mike Tyson at a pre-fight press conference."

TiVo has great brand association, and Wink's products are in 5 million set-top boxes. "That makes them great targets" with the media world's wheeler dealers.

Shares of Liberty Media had edged up by over 7 percent to $10.80 by midday Wednesday.