SONICblue to Acquire ReplayTV for Expansion to Digital Video Market

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SONICblue, manufacturer of Rio digital audio players, signed a letter of intent yesterday to acquire ReplayTV, a provider of personal digital television software.

The company expects an expansion to video will be a natural fit because the same companies dominating the audio arena own a majority of the content in the video market, he said.

"We are trying to come up with a broad strategy for the interactive home entertainment space," said Andy Wolfe, chief technical officer at SONICblue, Santa Clara, CA.

Under terms of the letter of intent, SONICblue will issue an aggregate of 16 million shares of common stock, options and warrants to buy shares of SONICblue common stock in exchange for all of ReplayTV's outstanding equity interests. ReplayTV, Mountain View, CA, will function as a wholly owned subsidiary of the company.

SONICblue's move follows ReplayTV's Nov. 29 business shift from manufacturing interactive video recorders and selling them directly to consumers, to licensing its technology to set-top box providers and other television-related companies. As part of the company's shift, it cut 130 employees, half its staff.

Wolfe said SONICblue was in discussions with ReplayTV before the business shift, but the original business model, which proved unprofitable, did not appeal to SONICblue.

"The new model allows ReplayTV to focus on technology and shift the marketing expenses out to video content partners," he said. "They are also no longer competing with content providers."

Through the agreement, SONICblue will continue to license the technology under the ReplayTV name to set-top box providers and other television-related companies. While SONICblue does not have firm plans yet to develop a proprietary interactive video recorder, Wolfe expects that to occur in the future.

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