Intel announced the acquisition of Omnitek, a UK-based provider of test and measurement equipment in the broadcast sector. Though this is not how Omnitek is described in the press release announcing the deal. Rather, the press release describes Omnitek as a leading provider of optimized video and vision FPGA IP solution. “Omnitek’s technology enables customized high-performance vision and artificial intelligence (AI) inference capabilities on FPGAs for customers across a range of end markets” continues the press release.
We are not questioning the validity of the statement. Rather, pointing out the contrast with the perception of Omnitek created through its marketing efforts. For example, Omnitek is listed in the recent 2019 NAB Show directory with the following description:
OmniTek is both a leading manufacturer of broadcast test and measurement equipment, and a major provider of design and consultancy services to broadcast, professional A/V, and image processing companies. Over the past 20 years our customers have included Altera, AMD, Avid, ARRI, Barco, Calrec, Cisco, Dolby, Ericsson, Harmonic, Harris, IntoPIX, Microsoft, Pandora, Riedel, Snell, Sony, Tandberg, Texas Instruments, Vicon and Xilinx, among many others. The engineering team at OmniTek has an international reputation for excellence. Our first products were born out of frustration at the lack of good test and measurement equipment for use in multi-format video environments. Over the years we have worked closely with our customers in post production, broadcast and design to offer a suite of products for waveform and data monitoring, physical layer analysis and picture quality diagnosis.
Intel’s press release does not even mention the words broadcast, media, test, or measurement. Industries cited in the release are video conferencing, projection and display, and medical vision systems.
Again, in contrast, Omnitek’s central hall booth at the NAB Show showcased the below broadcast products (images from NAB Show directory):
We will stop in pointing out the curious disconnect. As a general rule, an acquirer talks about the most valuable aspects of an acquisition in the press release announcing a transaction. Using this logic, Intel sees the value in the relatively-less-marketed part of Omnitek’s business, which pertains to its intellectual property portfolio. We have reached out to Intel’s analyst relation team to better understand both the transaction and expectations for the going-forward business within the media and broadcast sector. We will update the post once we hear back.
Terms of the deal were not disclosed. Omnitek did not meet the revenue reporting threshold for UK regulators and therefore only discloses its balance sheet accounts. To illustrate the size asymmetry between the businesses, if we assume Omnitek had revenues £1 less than the regulatory disclosure requirements than below is the side-by-side comparison of Intel and Omnitek’s revenues as well as relative booth spaces at the recent NAB Show (Intel did not have a booth on the exhibition floor, but did have meeting space in the South hall).
The point is Intel is gigantic compared to the totality of Omnitek’s activities, though Omnitek’s activities in the broadcast space represent a disproportionate amount of its focus and revenue.
Under the section labeled ‘Why It Matters’ in the press release, Intel’s cites its rationale for the acquisition. “With Omnitek, Intel can deliver optimized and highly efficient solutions that improve time-to-market for existing FPGA customers and win new ones in the rapidly expanding opportunity for FPGA-based vision applications.” The preface to this comment is a review of the market size of the opportunity. Intel views the market for silicon as a $300+ billion market opportunity and the market for programmable solutions as a $8 billion subset of this opportunity. The Intel Programmable Solutions Group, where Omnitek is anticipated to assist, is already a $2.0+ billion annual revenue business.
For those interested, the annual IABM DC Global Market Valuation Report (GMVR) is a reference on the market sizing of all media technology product and service segments. The annual market for Omnitek’s marketed test and measurement products is far, far smaller than the market for programmable solutions – which is not surprising.
Media technology suppliers should read optimism in this announcement. Very large technology companies believe the application of technologies from the broadcast sector are critical to addressing video markets far larger than the traditional use case of media.
In an unrelated, separate observation we were asked by TVBEurope to provide an outlook for the M&A environment toward the end of 2018. Here is an excerpt:
Finally, what does he [Josh Stinehour, Devoncroft] expect to see happen within our industry in 2019? “Drawing on the historical record, I expect more of the same: targeted M&A (buy versus build, geographic expansion, etc); creative mergers to add economic scale; pragmatic divestitures by larger technology organisations; and lastly a few totally surprising purchases by large IT organisations based on utterly arbitrary rationales.”
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