SONICblue purchases ReplayTV for $120 mil

No further layoffs after November job cuts, exec sez

Just two months after abandoning the consumer hardware market, digital video recording service ReplayTV was sold Thursday to digital audio device company SONICblue for roughly $120 million.

Deal will marry the technology and products of SONICblue, including the popular Rio digital audio player and Diamond Internet access products, with the digital video recording and storage technology of ReplayTV.

ReplayTV thus becomes the first of the two DVR category leaders, the other being TiVo, to find a buyer for the innovative technology. Industry observers have long believed that like WebTV, a Northern California-based independent technology company that was sold to Microsoft for $425 million, ReplayTV and TiVo were looking to create a technology that could also attract a suitor with a big wallet.

Both came to market about the same time with set-top boxes that are essentially computer hard drives with the capability of recording and storing TV programs digitally and pausing and rewinding “live” programming. Although both attracted investments by nearly every major media company, only TiVo went public before the stock market took a nose dive last year, dropping TiVo stock from the high $70s to $6.81 Wednesday.

Shifting focus

ReplayTV withdrew its planned stock offering last summer and announced in November that the company would shift its focus from set-top boxes to licensing its technology for use in digital cable and satellite systems and other broadband devices.

ReplayTV veepee marketing Steve Shannon said Thursday that strategy would not change as ReplayTV becomes a wholly owned subsidiary of SONICblue. ReplayTV will remain based in Mountain View, Calif., which is near the Santa Clara home of SONICblue.

There will be no more staff downsizing after the dismissal of 120 employees in November, and ReplayTV CEO Anthony Wood will remain the head of Replay, although he may get a new title with SONICblue, Shannon said. SONICblue’s stock price dropped nearly 2.5% to $7.50 on the news Thursday.

Shannon said that SONICblue and ReplayTV share the same vision of networked entertainment in which music and video will be fed into the home and accessed from any point in the home over a network.

SONICblue will issue an aggregate of 16 million shares of common stock and options and warrants to purchase shares of SONICblue common stock in exchange for all of ReplayTV’s outstanding equity interests.