Motorola in First Israeli Acquisition: Bitband

Motorola set to embark on its first foray into Israeli startup investments: it is acquiring the startup BitBand, which is located in Netanya. The terms may be a disappointment to the company's backers, though.

TheMarker has learned that the BitBand employees will receive a formal announcement of the company's takeover by Motorola shortly.

The deal will be consummated at a price of an estimated at $10 million-$15 million, while investors have put $18 million into the company to date, according to IVC-Online. In other words, this is not an exit to boast about, at least in financial terms.

BitBand was founded in 2000 and today has several dozen workers. It creates and sells cross-platform video Content Delivery Network (CDN) technology to telecommunications companies that want to consolidate content management across all networks for efficient delivery.

Investors in the startup include American and Israeli venture capital funds including Ascend, Apax Partners, Challenge-Etgar, Sequoia, Aviv Ventures and Portview Communications.

BitBand had been considered a very promising company, and in 2005 was named as one of the three world pioneering technology companies from Israel by the World Economic Forum. Nevertheless, at least financially, the company has been less successful than expected, mainly because of the plethora of competition that has entered its market.

Content Delivery Network solutions are used mainly to solve two problems for content providers: access time and problems relating to network load.

All CDN companies use server farms scattered throughout the world, which enable surfers to access content more easily. For example, an Israeli Internet surfer who wants to access a games Web site need not directly access the U.S. web site - the content is stored at server farms in Israel.

The main problem with CDN providers is the high cost of building and maintaining server farms, but by using software platforms, companies like BitBand, or products made by its competitor Contendo, the content providers can reduce the number of servers needed at each farm and even the number of farms themselves.

One of BitBand's solutions is Maestro, a platform for management of video server networks and content distribution. Another is its Vision line, appliance servers providing high quality streaming capacity.

Another product, its QualiCTV, enhances video viewing quality. BitBand does business with a variety of clients and partners who broadcast video content over the Internet.