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

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

“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.

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