Behind NTT DoCoMo’s $45.5M Stake in PacketVideo

7/6/09Follow @bvbigelow

NTT DoCoMo, the Japanese wireless communications provider, has invested $45.5 million to acquire a 35 percent stake in PacketVideo, the only operating company of San Diego digital media provider NextWave Wireless (NASDAQ: WAVE).

In a statement released last night, PacketVideo says the all-cash transaction is intended to strengthen DoCoMo’s position as a provider of music and video services in Japan. But the deal also provides a key infusion of cash for NextWave, which intends to use the net proceeds to pay down its debt and help with a corporate restructuring that NextWave announced last year, according to Neil Sharma, a PacketVideo spokesman and senior vice president.

Japan’s biggest wireless operator has been a key customer since 2003, when PacketVideo launched its video and audio media player software as part of DoCoMo’s 3G FOMA service. FOMA uses packet-based data transfer to support a broad variety of mobile software applications, including Internet access, e-mail, file transfers, remote log-in and Internet phone applications.

But Sharma tells me today a key element to the deal is that it is non-exclusive, meaning that PacketVideo is still free to supply its software to other wireless operators and mobile device makers. “DoCoMo has made it very clear that they want to strengthen their solutions in Japan,” Sharma says. But at the same time, they want to ensure stability in a company that is providing innovation to the entire industry. “This in effect allows PacketVideo to work more effectively,” Sharma says. “It’s almost a joint venture in a way.”

PacketVideo’s other customers include Verizon Wireless, T Mobile, Nokia, Motorola, Canada’s Rogers Telus, and France’s Orange. As of 2008, Packet Video estimates that its media software was embedded in more than 320 different mobile devices.

As Wade noted last September, NextWave has been dismantling or selling off its wireless semiconductor and network equipment businesses to focus on reselling the wireless spectrum it has licensed around the world and on PacketVideo, its sole remaining operating business. The company said in May that it lost $82.2 million on sales of $16.9 million in its first quarter ended March 28.

Sharma says PacketVideo’s all-in-one media software, called pvPlayer, was designed to play video and audio on mobile devices regardless of format. It is currently installed in more than 90 DoCoMo handset models. While PacketVideo is known primarily for its mobile media technologies, Sharma says the company also is capitalizing on the nascent “home connected market.” Its “TwonkyMedia” technology makes it possible for users to share video and audio clips on devices that share a home wireless connection.

The company has about 400 employees and contract workers in offices around the world.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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