NDS Plays Down Canal+ Talk

NDS and Kudelski could be in a two-way fight for Canal+ Technologies, the conditional access (CA) vendor put up for sale by Vivendi Universal. NDS CFO Rick Medlock denied any deal for Canal+ Technologies was imminent. He told Interspace: “I wouldn’t say we are seriously looking at it right now.”

But Medlock did make it clear that the NDS wants to play a key role in industry consolidation, and isn’t just focused on organic growth. “I think our position remains in general that we are looking to be an acquirer of CA businesses if they become available, but we are not willing to overpay. We will only pay the right price for the asset.”

Medlock also underlined some of the factors behind a possible deal. “You have to look at the financial performance of Canal+, which is difficult to ascertain from the Vivendi accounts. We need to see what the revenues and more importantly, what the ongoing contracts are, because clearly some of their platforms like ITV Digital and Telepiu have either gone because of bankruptcy or are going to be sold. So, you would have to evaluate closely the ongoing potential.”

It now looks a two-horse race for Canal+ Technologies. A source familiar with the situation told Interspace that Liberate Technologies had been negotiating with Vivendi Universal earlier this year to acquire Canal+ Technologies but the talks consequently stalled. It seems unlikely now that Liberate will renew its interest.

The speculation surrounding NDS’ possible move is not surprising given its strong set of financial results despite difficult market conditions. For the most recent quarter, announced in early August, NDS saw full-year revenue up 12 percent to 241 million pounds ($368 million). It also had revenues of 65 million pounds ($99.6 million) in the fourth quarter. NDS expects revenue growth of 8 to 11 percent in the next financial year. Medlock admitted that NDS sees a “a pretty tough environment” over the next 12 months, particularly in Latin America where the economies are still very weak.

Despite not hitting previously stated guidance, Medlock was happy with the performance. “Taking you back 12 months, we had given our public targets for something around 15-20 percent revenue growth. We came in about 12 percent, so we were slightly under what we said at the start of the year. I think that was when the economic conditions looked somewhat better than they turned out to be. We certainly reduced the guidance as we had gone through the year. Fundamentally, I think they were a very strong set of results in the current climate.”

NDS could also be in prime position to benefit if Vivendi is successful in divesting some of Canal+’s international assets. If News Corp finally manages to close a deal for Telepiu, the Italian door will suddenly open. Medlock admitted: “If News Corp buys [Telepiu], we are at an advantage in terms of winning them immediately or in the longer term. Clearly, if someone else comes along and buys them, we will be bidding and trying to get in there. I don’t think necessarily people are going to make technology changes immediately because of costs. It just opens up the opportunity. It is clearly an advantage for us if News Corp buys the platform.”

–Mark Holmes