Google on Wednesday announced an agreement to acquire a video-compression technology developer. The stock deal for On2 Technologies is valued at approximately $106.5 million.
Under the terms of the agreement, each outstanding share of On2 common stock will be converted into 60 cents worth of Google class A common stock.
“Today video is an essential part of the Web experience, and we believe high-quality video-compression technology should be a part of the Web platform,” said Sundar Pichai, vice president of product management at Google. “We are committed to innovation in video quality on the Web, and we believe that On2’s team and technology will help us further that goal.”
Beefing Up YouTube
On2 technologies power the video in many of today’s leading desktop and mobile applications and devices. Customers include Adobe, Skype, Nokia, Infineon, Sun Microsystems, Mediatek, Sony, Brightcove and Move Networks.
The deal is subject to approval by On2 stockholders and review by regulatory authorities, including the SEC, but Google expects it to close in the fourth quarter. Google declined to discuss specific product plans until after the deal closes, but analysts expect the search giant will use On2 to improve its YouTube property and enable native streaming in HTML 5.
The 60 cents-per-share acquisition price represents a premium of about 57 percent over the closing price of On2’s common stock on Tuesday. It’s also a premium of about 62 percent over the average closing price of On2’s stock for the past six months.
Bolstering HTML 5
“Video compression is the underpinning of what makes streaming video workable or not workable,” said Brad Shimmin, an analyst at Current Analysis. “YouTube is still using (Adobe) Flash to some extent, but it also uses a video codec. This is first-generation technology that could using some updating. Owning On2 is going to help Google make YouTube more commiserate technologically…