Microsoft in Talks to Acquire Local Startup 3DV Systems

The first Israeli exit of 2009 is hitting the road. Software giant Microsoft is negotiating to acquire the Israeli startup 3DV Systems for about $35 million, despite the alarming condition of the global economy and grim forecasts of more pain to come.

This is no dream exit, however. To date 3DV Systems has raised $38.6 million in financing, according to IVC Online, which means that at least some investors will be losing money.

Speaking of which, the company is owned by Elron, a member of Nochi Dankner's IDB group, the venture capital funds Pitango and Kleiner Perkins Caufield & Byers, and RDC Rafael Development Corporation.

3DV Systems develops "virtual reality" imaging technology for digital cameras that it sells, called ZCams (formerly Z-Sense). Its main targets are the gaming market ("enjoy a genuinely immersive experience," the company says on its Web site).

Now that graphics have become so advanced, it explains, the key to making a real difference lies in how you can control the game. The ZCam lets players control the game using body gestures alone, rather as PlayStation's EyeToy does, or Microsoft's Vision or Nintendo's Wii. 3DV Systems argues that its system is better than these, adding that you don't have to wear anything.

Microsoft apparently plans to use 3DV Systems' technology in its own gaming technology, probably in the Xbox 360.

ZCam is also useful in video-conferencing; for example, to change the background behind the subject being filmed. You could be talking from your home and deploy a background that makes you seem to be at your office, an airport, whatever. You could place presentations behind you as a background.

In the car industry, the product could identify the right moment to deploy airbags or identify driver fatigue. In the home, it could become a means to control the digital house.