Verizon Said to Spend Under $200 Million on Intel TV Service

Jan 21, 2014 5:17 pm ET

(Updates with closing share price in 11th paragraph.)

Jan. 21 (Bloomberg) -- Verizon Communications Inc. agreed to pay less than $200 million to buy Intel Corp.’s Internet- television startup, according to two people with knowledge of the matter.

The two companies announced the deal in a statement this morning, saying it included about 350 Intel employees coming to Verizon. The people familiar with the price asked not to be identified because the companies aren’t disclosing the transaction’s financial terms.

In Verizon’s hands, Intel Media’s OnCue could provide fresh ammunition against cable and satellite providers. The second- largest U.S. phone company said the purchase will speed up the introduction of new features for its FiOS network, and Verizon will offer it as an Internet-based service outside of its coverage area and on mobile devices.

“We will have the opportunity to enhance, expand, accelerate and integrate our delivery of video products and services to better serve audiences on a wide array of devices,” Verizon Chief Executive Officer Lowell McAdam said in the statement.

TV Programming

Intel, the world’s largest chipmaker, began looking for a buyer for its TV business last year. The Santa Clara, California-based company no longer wanted to incur the expense of acquiring programming and bringing the service to market on its own.

The company has backed off its TV efforts under new Chief Executive Officer Brian Krzanich. He took the reins in May and is focusing on revitalizing the company’s efforts to win chip orders from mobile-phone and tablet makers as sales of those devices erode demand for its traditional market, personal computers.

OnCue is designed to provide pay-TV programming over any high-speed Internet connection, making it a threat to cable-TV services that deliver shows over dedicated lines restricted by territory. Intel’s system includes servers, set-top boxes and applications that can stream content to televisions, phones and tablets.

As part of the deal, New York-based Verizon will purchase intellectual property rights and other assets related to the OnCue platform, the companies said. Intel Media’s management team will stay with the business.

The emergence of a potential new service on the national pay-TV scene comes as the largest cable companies weigh a new round of consolidation to gain leverage in contract talks with the biggest film and TV studios.

Charter Communications Inc. last week offered to acquire Time Warner Cable Inc. for about $37.4 billion, not including debt. Time Warner Cable rejected the proposal as too low. Charter, backed by billionaire John Malone, is seeking to create a provider of TV, Internet and phone service for about 20 million subscribers in 38 states.

Intel shares fell 1 percent to $25.59 at the close in New York. Verizon, which reported earnings today, retreated 1.3 percent to $47.70.

--With assistance from Kenneth Wong in Berlin. Editors: Nick Turner, John Lear