Citrix of US Negotiating Purchase of VDOnet Product Line for $8 Mln

VDOnet of Ra'anana has developed technology for broadcasting video films via the Internet, but has not enjoyed commercial success in the last few years.

US company Citrix is negotiating the purchase of a product line from Israeli company VDOnet for $8 million.

VDOnet of Ra'anana was set up in 1995, and was considered one of Israel’s promising Internet companies. The company developed technology which enables direct viewing of video films via the Internet, with no need to download the video film from the Internet to the computer first in order to view it by running it. Besides watching videos, the same technology enables telephone calls via the Internet, and other communications services.

VDOnet was founded by company general manager Assaf Mor, and Gidon Barak. At first, the company grew at an impressive rate, and in its heyday Microsoft bought 10% of its shares for $10 million. At its peak, the company employed 100 people, but in the wake of its failure to compete with its rivals in the video market, among them Real Networks and VExtreme, the workforce shrank to 20.

Amazingly, the two companies that shoved VDOnet aside were aided by the very same Microsoft, which also invested in VDOnet’s competitors. Together with Microsoft, the shareholders in VDOnet include Mor and Barak, and also US Media Group, Nynex, and Battery Ventures.

One possible growth direction for VDOnet is penetration of the Japanese market. This market has a widespread ISDN line infrastructure, which could be effectively explored for transmitting video on-line broadcasts using VDOnet products.

The product line which is the subject of the negotiations is VDO-line, the company’s main product line, used for video broadcasts via the Internet. This product line is used by many companies, among them broadcasting networks CBS, MTV, and others.

The company’s other products are VDO-phone, which enables telephone calls via the Internet or an ordinary line while the parties view each other, and VDO-mail, which makes the customer’s standard e-mail service more efficient when it comes to pictures and sound.

Citrix, which is interested in purchasing technology from VDOnet, is a US company mainly specialising in software for the client/server environment. This week, the company reported revenue of $56 million in the second quarter of 1998, and a profit of $17.2 million (excluding one-time allowances, which caused the company a bottom line loss). Citrix would use the VDO-line product line to provide its customers with more advanced service, along with the standard programs it supplies to them.

Published by Israel's Business Arena on July 21, 1998

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