IBM Confirms Ustream Acquisition As Part Of Cloud Video Unit Targeting "$105 Billion Opportunity"

Ustream cofounder Gyula Feher poses in the company’s Budapest office in 2014. 

Days after reiterating faith in “strategic imperatives” in cloud computing that their counting on to turn the ship slowly around, IBM IBM +0.82% has made a moderately splashy acquisition to boost its video efforts.
IBM announced Thursday it has acquired Ustream, a nine-year-old provider of live video streaming. As part of the acquisition, IBM also announced a new Cloud Video Services unit to include the company.
Terms of the deal were not disclosed. Fortune had reported on Wednesday that the deal, then reportedly in final talks, would value Ustream at about $130 million.
Ustream’s CEO Brad Hunstable will not lead the new unit, with it falling under general manager Braxton Jarratt. IBM didn’t specify in its release whether Hunstable would be remaining long-term with the new unit. Ustream claims to have 80 million viewers per month, working with customers including Facebook FB +0.00%NASA and the Discovery Channel. It joins the also-acquired startup Clearleap in the new unit, targeting what IBM claims is a $105 billion market for cloud-based video.
“Through this latest acquisition and the creation of a new cloud business unit, IBM will provide an end-to-end suite of digital video solutions for the first time under one roof,” Jarratt said in a statement in the release. “As a result, clients will be able to take advantage of every stage of the video life cycle through advances in customization, digital access, visual analytics and more, all to enable the consistent delivery of video content globally.”
If the $130 million deal size proves accurate, it would represent a modest outcome for Ustream and one that’s relatively modest for IBM’s stated acquisition ambitions. Ustream had raised $49 million since its founding in 2006, including $33 million in Nov. 2011 from investors led by Softbank , according to data from Pitchbook. Assuming Softbank had acquired about a quarter of the company, its money would have valued Ustream at about the same price as Fortune reported, more than four years ago.
IBM, meanwhile, announced about five years ago that it planned to spend about $20 billion on acquisitions over that period. It has since made promises to repurpose $1 billion for hybrid cloud efforts, various Watson efforts including an IoT unit based in Munich, Germany and analytics product, and other areas of the “strategic imperatives” that include mobile and security in addition to cloud and analytics.
In its most recent earnings on Tuesday, IBM reported revenue for those units at at $29 billion for 2015, growth of an adjusted 26%, while finally beating Wall Street consensus on earnings and revenue. Investors, however, had been unimpressed, the stock dropping more than 8%. News of the Ustream acquisition helped send IBM’s stock up about $1.94, or 1.6%, as of 11:15 AM ET in mid-morning trading.

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