News Analysis: Optibase Refocuses; Whither Media 100?
Posted Jan 20, 2005

During Optibase's June 2004 announcement of its completion of the acquisition of the assets of Media 100, then-CEO Tom Wyler noted, "The Media 100 acquisition will allow us to leverage our experience in digital video to add editing and compositing solutions to our already wide range of applications. In addition to expanding our product line and adding new customers and channel partners, we are taking on close to 40 highly skilled engineers as well as dedicated sales and marketing professionals who we believe will play a key role in Optibase's performance in the years to come."

Optibase intended to leverage its purchase of Media 100's assets—along with additional financial investment--to allow Media 100 to regain market leadership lost in the uncertain final days leading up to its bankruptcy. Amir Goren, an experienced Optibase executive, was sent from Optibase's Herzliya, Israel headquarters to Media 100's home base in Marlboro, Massachusetts to lead the effort. Wyler then proclaimed, "Amir's experience will help Media 100 regain its position as a leading provider of best-in-class integrated and professional editing and compositing solutions, with strong backing from Optibase."

What enticed Optibase during a Massachusetts summer, though, evidently looked less appealing in the harsh reality of a New England winter. The honeymoon lasted less than seven months, during which time Optibase brought on a new CEO, Uzi Breier.

As noted in a January 7 press release, titled "Optibase to Restructure Media 100 Unit," Optibase is pulling away from its previous comments about Media 100 playing a key role in the company's future. "The digital non-linear editing market does not present Optibase with the most substantial growth opportunity and is not fully synergistic with the Company's core activities," Breier stated. "While Optibase will continue to sell and support the existing suite of Media 100 products, certain positions at Media 100 will be eliminated," the release continues, "and research and development initiatives with regard to Media 100 will be considerably reduced in order to improve the financial results derived from this business unit." So much for the "40 highly skilled engineers as well as dedicated sales and marketing professionals who we believe will play a key role in Optibase's performance in the years to come" that Tom Wyler had touted just a few months earlier.

Why the hasty retreat? And what are the implications for Media 100—a product line left for dead almost a year ago, only to be revived by the hope that Optibase would provide current and future users with a glimmer of the greatness that the Media 100 brand once denoted? Two thoughts spring to mind.

First, while Optibase had the cash to acquire Media 100's assets—which were available at the bargain-basement price of $2.5 million, less than one year after Media 100 had $16 million in the bank—Optibase's purchase was not intended merely as a stopgap to wait out the fluctuations of its core industry vertical, the telecom industry. It was an attempt at a master plan that was not given time to come to fruition.

Optibase has a history of producing and selling quality MPEG-2 compression boardsets; the Media 100 asset acquisition provided not only next-generation compression boards but also a natural vertical integration between content acquisition, content creation/editing, and content distribution. Media 100 itself had toyed with a similar approach back in 2000 with its acquisition of Terran and its Cleaner transcoding products, but Optibase—leveraging Media 100's well-known content acquisition and editing quality—had a unique opportunity to use Media 100's assets to full advantage across the full spectrum of acquisition, editing, and distribution.

Danny Lustinger, Optibase's President and CFO, noted in a July 2004 release that Media 100's next-generation product, 844/x, was ideally suited for Optibase's customer base. "The product targets professionals, from independents to large broadcasters and post-production facilities, as well as advanced corporate, educational, and institutional media departments. These are some of the markets that Optibase already targets for encoding and streaming applications and we believe that customers of both Media 100 and Optibase products will benefit from these product synergies."

He went on to say that Media 100 investments were intended for Optibase's long-term benefit. "While we plan to invest resources [in Media 100] that might reduce our profitability in the short term, we believe that such expenditures will enable Optibase to emerge as a leading player in the post production and content creation markets," he said. "Media 100 established an excellent brand in these markets. Its commonalities with Optibase include its professional hardware and software that enjoy high credibility among industry leaders. We plan to leverage this credibility in order to reach a position of leadership."

Second, in its haste to rid itself of a problem child, Optibase appears to be shedding key personnel and engineers during this realignment. Wyler, now chairman of Optibase, noted that one of Media 100's key assets was its crack engineering team. The new CEO's decision not only effectively renders the Media 100 R&D effort null—increasing rumors about the demise of all Media 100 flavors from iFinish and Media100i to the newer 844/x—but it also raises doubts about Optibase's total $2.5 million investment. The question of a purchase gone sour and realignment within Optibase also begs the question of core stability and ongoing R&D efforts across the entire company. This restructuring will be watched with interest as Optibase re-emphasizes its role with MediaGateway encoding and server products at its traditional base of tradeshows like Supercomm that cater to the telecom industry.

In conclusion, Breier noted in the latest release: "While we will continue to support the revenue-generating elements of Media 100`s business, we believe that this restructuring will enable Optibase to focus more directly on growing the core segments of its business, maintaining its leadership position in the content creation market and expanding Optibase`s presence in the IPTV market." He made a hard decision, choosing to back away from a vertical master plan and effectively relegating the Media 100 brand to yet another slow, painful death.

His decision is striking, especially given the limited time the plan was allowed to grow and the expertise of the assembled Media 100 business unit team that included Mike Savello, Amir Goren, and other industry leaders who helped shape the master plan. The restructuring will yield additional challenges that might have been offset had Optibase allowed a longer timeframe for implementation or softer landing for Media 100 customers. Until properly addressed, Optibase's January announcement will continue to fuel speculation that Media 100 users have yet again been abandoned.