Updated: Cisco To Acquire Extend Media In Deal Worth $80M

This morning, Cisco announced that it intends to acquire privately held Extend Media with the deal expected to close in the first half of Cisco's fiscal year 2011. Someone inside Cisco's Service Provider Video Technology Group, who didn't want to be named, told me that Cisco valued Extend Media at "around $40M". Cisco's PR department declined to comment on that number and said that they "aren't discussing financial terms of the deal." While the $40M number comes from someone inside Cisco who would know the details, the valuation seems high to me.

Updated: I have learned that the deal is actually worth about $80M. While that number initially seems high since that would give Extend Media a 4-5x multiple on revenue, as it was pointed out to me, Cisco paid more than usual due to competitive reasons. Extend Media and thePlatform are really the only two companies in the space with carrier grade solutions and with Comcast already owning the platform, Extend Media was really the only other company for Cisco to acquire for which they had to pay more of a premium.

Extend Media did have some well known customers but their customer count was small. The company which had raised just over $30M in VC funding was not profitable and like many smaller companies in this space, faced a tough choice of trying to raise another round, or find a suitable buyer. In this case, Extend Media made the right move as raising a fourth round in today's market would have been very difficult, especially with the industry being so competitive with numerous vendors. The sale to Cisco now gives Extend Media the resources they need to grow their business and Cisco gets a platform that does have some good functionality, but will require Cicso to make an investment into scaling out the platform.

Lots of folks are asking me if Extend Media was considered an online video platform (OVP) and if so, are there other companies similar to Extend that might be attractive to other large players like Cisco. The term OVP is very generic these days but Extend Media would not be classified as an OVP. Most OVPs provide solutions directly to publishers and content owners and Extend Media focused on selling their platform to telcos and carriers. Extend Media is a software play deployed inside the carriers network whereas OVPs offer their services via a SaaS based offering. Some of their customers include Bell Canada, AT&T and Verizon.