Computer giants fight for motion recognition cos

Israeli companies like PrimeSense and InVision Biometrics are profiting from the attention.

Last year, Microsoft Corporation (Nasdaq: MSFT) announced that it intended to acquire gesture recognition software developer Canesta Inc. The announcement was no surprise to the industry, as Microsoft was betting that adding gesture recognition to its Xbox 360 would help it complete against Sony Corporation (TSE: 6758; NYSE: SNE) and Nintendo Corporation. Microsoft and Canesta declined to disclose financial details, but the acquisition was part of a general strategy.

However, sources believed that if Microsoft were to acquire a gesture recognition software developer, it would be Israel's PrimeSense Inc., whose technology was already incorporated in Microsoft's Kinect game console. Sources inform ''Globes'' that Microsoft has been seeking alternative technology for PrimeSense's technology for a long time and that it has invested $300-400 million in the effort to date. It is not clear whether Microsoft has succeeded, but the company is developing the next version of Kinect, which is scheduled for launch in 2013-14, based on in-house technology.

Microsoft's intention is logical. Kinect was an immediate success on launch, with the sale of 10-11 million units in 2011. Microsoft plans to expand the integration gesture recognition technology from games to other strategic applications in the home and communications devices, which why close ownership of the technology is so important.

The acquisition of Canesta was Microsoft's second deal in the sector, following its acquisition of the assets of Israeli start-up 3DV Systems Ltd. But the company's technologies and patents in the sector cannot match the capabilities of PrimeSense.

Although gesture recognition software developers are similar functionally, there are small differences in the analysis and conversion of the image from the real 3D space to the virtual space, and the different software interfaces create different experiences for the end-user.

The question mark about PrimeSense's relationship with Microsoft reflect the rapid changes in gesture recognition interfaces. In July, Qualcomm Corporation (Nasdaq: QCOM) acquired GestureTek, which also provides technology for Kinect, and Intel Corporation (Nasdaq: INTC) is in talks to acquire Israel's InVision Biometrics Ltd. for $50-60 million..

At the same time, there are many other companies developing gesture recognition software. Israeli companies include Extreme Reality Ltd. (XTR3D), which collaborates with Texas Instruments Inc. (NYSE: TXN), and with Omek Interactive Ltd., which is developing technology that can convert whole body movement into 3D movement of avatars.

Computer giants would be happy to integrate motion recognition software into their products, either through collaborations or acquisitions, and this desire will presumably soon be seen in the market. In the case of Intel, the strategy is intended to offer an alternative to PrimeSense's technology, not necessarily to directly challenge Kinect. Meanwhile, PrimeSense has not been able to leverage its technology beyond the collaboration with Microsoft.

PrimeSense' collaboration with Taiwan's ASUSTek Computer Inc. (Taipei: 2357) should soon result in the delivery of motion control systems for PCs. PrimeSense said in response, "The company takes a long-term view, and it intends to be a big and important player in the motion control market."

PrimeSense has big ambitions, as its latest $50 million financing round from Silver Lake can attest, but so far it has had no alternative to its sole primary source of revenue - Microsoft. This relationship reportedly generates $100 million a year for PrimeSense, but it is unclear if the company is profitable, given the high cost of its systems.

Many Israeli high-tech sources are counting PrimeSense's days as an independent company. Sources inform ''Globes'' that although the company has not officially approached an investment bank, bankers have been trying to sell the company to a home appliances electronics giant at a $1 billion valuation. This figure may appear huge, given the company's $400 million on second market exchanges, double the company value for the Silver Lake investment.

Published by Globes [online], Israel business news - - on November 7, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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