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Liberate Captures Sigma for $62 Million

With the battle over interactive television (iTV) middleware still brewing strong in both the markets and the courtrooms, one of the space's major player, Liberate Technologies, Wednesday made a move to enhance their voice and data services.

The San Carlos, Calif.-based company signed a definitive agreement to acquire Sigma Systems Group, a provider of cable industry service management solutions for approximately $62 million in cash. Liberate will use Sigma's currently existing cash of approximately $20 million to help finance the transaction.

The acquisition of Sigma Systems is expected to aid Liberate by adding Sigma software's management and delivery of voice and high-speed data services to Liberate's traditional strength in video-based, interactive television services.

"Combining Liberate and Sigma forms a powerhouse for the support of digital infrastructures, and we believe gives us broader and deeper technical capabilities than anyone in the marketplace," said Mitchell Kertzman, chairman and CEO of Liberate Technologies. "This is a significant stage in the evolution of Liberate as a company, which will dramatically increase our ability to help network operators drive revenues per subscriber, enhance customer service and reduce operating costs."

With the addition of Sigma's solutions, Liberate will gain the ability to enhance automated service management and delivery. In enabling the "triple play" of video, voice, and data services, the Liberate/Sigma combination facilitates the trend among many network operators to integrate technologies across multiple services.

"The triple-play of voice, video and data is always a good move, as one service can drive another," said Ben Macklin, an analyst at eMarketer.

The analyst, however, warned that uncertainty remains about how widespread iTV features will be implemented.

"While digital TV continues to grow strongly in both North America and Europe, the jury is still out on the profitability of providers rolling out interactive TV services other than video on demand, PVR functions, interactive program guides and interactive gambling [which has been successful in Europe]," said Macklin.

Sigma's operational support system (OSS) and Service Management Portfolio software enables service providers to create, deploy, monitor and maintain subscriber services in an automated system. Combining the Sigma solutions with the Liberate TV Platform for interactive television will enable Liberate to offer a more comprehensive infrastructure software suite that will simplify operations, enable cross promotions of premium, telephony, and IP broadband data services via enhanced TV.

The Service Management Portfolio provides an automated operational environment for residential and commercial data services, circuit-switched and IP-based cable telephony, interactive TV, and high-speed Internet services including e-mail, content, and web-hosting applications. It integrates with existing back-office systems at network operators, making it easier to manage digital services

According to officials at Liberate, the Sigma purchase is a good match for the company, as both are standards-based and server focused, with similar database functionalities. Both companies have also been active participants in CableLabs, the technology consortium for cable system operators in North and South America, and the emerging International PacketCable and EuroPacketCable standards as part of the European Cable Communications Association (ECCA).

The transaction is not expected to alter the company's current guidance on profitability. Liberate anticipates achieving profitability on a pro forma basis sometime during the second half of its fiscal year 2003.