This evening (Monday) Microsoft announced a cooperative and investment agreement with Israeli company VDOnet. The two companies have agreed to cooperate on Internet communications technologies developed by VDOnet.
Asaf Mohr, president and CEO of VDOnet, was unwilling to reveal either what percentage of the company had been acquired by Microsoft or at what sum, but did say the amount was less than 10%.
At the same time, US West Services, a division of the US West Media Group, announced it has also acquired a stake in VDOnet, also less than 10%.
The Ra'anana-based VDOnet was launched in the fall of 1995 and today offers both VDOLive products for Internet video broadcasting and VDOPhone products for Internet video telephony. Users of VDOnet's products and technology are producers of information and entertainment content, advertising and promotion, distance learning and just about anyone who wants to communicate with video over the Net. Today, VDOLive is being used by nearly 150 sites to develop video, including PBS, CBS News, Paramount Digital Entertainment, and many others. VDOnet has offices in the US, Israel and Japan.
Microsoft and US West join a list of other famous names already invested in the company. US telecom provider NYNEX has invested in VDOnet at an estimated $100 million company value. The Battery Ventures fund has invested a reported $4 million. Another investor, the Star fund, purchased shares from the company's owners.
According to capital market estimates, Lehman Brothers planned to take VDOnet public on Wall Street at $400 million company value, but this was later reduced to $250 million. The IPO was postponed due to a lack of enthusiasm on the part of US investors, disappointed in Internet dream companies which have yet to turn a profit. Estimates are that the IPO will take place when Wall Street's attitude towards Internet industries changes. In the meantime, VDOnet's heavy investments in development and marketing require ongoing fundraising activities.
The company employs 70 workers,45 of them in Israel. Six months ago, the company had only 40 employees.
"Microsoft is advancing technologies and new products that are making Internet communications very valuable," said John Ludwig, vice president of Microsoft for Internet platforms and software tools. "After a long examination, we reached the conclusion that VDOnet's technology will complement our efforts and will become a critical component in future Internet communications." In addition to the investment, the companies will cooperate in providing a solution for the technological challenges presented by the new video transmission standards.
"We are very satisfied with our investment in VDOnet," said John L. O'Farrell, president of US West Media Group's Interactive Services Group. "The cable modem service we currently offer allow greater access to the Internet, not only in terms of speed, but also in terms of using enhanced media. We expect audio and video to become key elements in these applications and VDOnet is the leader in the field."
US West Media Group is expected to become the third largest cable provider in the US, upon completion of a merger with Continental Cablevision. US West owns 25% of Time Warner Cable.