Tandberg CEO Expects Strong Growth from Satellite

[12-05-07 – Satellite News] While looking to tap more into IPTV markets, Tandberg Television still will derive the majority of its revenues from the satellite space, Tandberg Television CEO Eric Cooney said.
    The company, acquired by Ericsson in February for more than $1.5 billion, currently generates around 50 percent of its revenues from the satellite space and 2007 and 2008 are likely to be strong years in terms of generating revenues from satellite, Cooney told Satellite News. “In 2007, our satellite revenues are definitely up, relative to 2006, and the satellite segment is our best performing segment in 2007.”
    The main drivers for the satellite market are the shift from MPEG-2 to MPEG-4 advanced video compression (AVC) as well as growth in the amount of high-definition (HD) programming being delivered, said Cooney. This momentum likely will carry into 2008.
“On a percentage growth basis, it is certainly possible that IPTV could exhibit a higher year-on-year percentage growth, but that is partly due to it growing from a much smaller base,” he said. “So satellite will remain our largest segment and we expect year-on-year double digit growth in 2008 relative to 2007.”
    The move to HD by satellite pay-TV operators worldwide means there should be plenty of deals on the table for Tandberg, said Cooney, who sees “MPEG-4 AVC being the technology of choice for the better part of the next decade. That said, in exactly the same way as we saw with MPEG-2, there will be a long road of incremental performance enhancements. We have already started down that route. Since our launch two years ago, we are already on our third generation MPEG-4 AVC HD encoding platform and we will continue with development in this area to drive efficiency out of the new MPEG-4 AVC toolbox.”
    Since Tandberg serves the entire pay-TV market, Cooney has a good grasp of the changing dynamics, and he believes it is “imperative that [satellite operators] continue to push the envelope. That is why you see someone like DirecTV, for example, launching incredible numbers of HD channels. That is something that would be challenging for others to compete with and a compelling differentiator for them. I think you will continue to see operators push the envelope in search of creative ways to differentiate their service and create a better value proposition for their subscribers.”

New Ownership

    While Tandberg answers to new owners, Cooney says there has been very little change in the culture and the day-to-day running of the company. “We were both technology leaders in our markets and profitably growing companies,” he said. “As far I am concerned, that sort of profile largely defines and anchors a culture within any organization. I have often said that I think you can walk the hallways of an organization and fairly quickly work out whether it is a successful, growing company or whether there are challenges facing the company. You won’t need a financial/corporate presentation to get a sense of the success of the company; it will be evident in the attitudes and the demeanors of the staff. What we have found with Ericsson-Tandberg is a lot of similarities in terms of the cultures of the two companies that is making the integration fairly straightforward.”
    Ole Jørgen Rød, a technology analyst at First Securities who covered Tandberg prior to the acquisition, believes the deal makes sense for both parties. “What we have seen in the last year is telcos moving away from just supplying voice equipment services to also providing different video services and IPTV,” he said. “This is, in part, a defensive response as cable players are attacking their core areas. Being able to offer the whole package including the infrastructure necessary to provide video services should make a lot of sense for Ericsson. They should also be able to boost Tandberg TV in the sense that Tandberg TV was a relatively small organization competing against large companies. With Ericsson’s customer relationships and global networks, they should be able to win more deals than they did previously.”
    Before being acquired by Ericsson, Tandberg had been very aggressive in acquiring other companies such as N2 Broadband and SkyStream Networks, and Cooney expects that Tandberg will remain aggressive in this area.
“The only thing that has changed is instead of going to a board of directors based in Norway, I am now going to a steering group based in Sweden with recommendations for acquisitions. Ericsson clearly expects us to continue to deliver on our track record of profitable growth and as part of our long-term strategic plan we’ll continue to evaluate acquisition opportunities.”