Home Business Telecommunications Telstra takes $273 million hit on Ooyala writedown
Telstra takes $273 million hit on Ooyala writedown Featured

Telstra is preparing to write down by $273 million the value of Ooyala, its US-based intelligent video business, to zero. The telco announced the writedown following what it says were substantial efforts over the past 18 months to improve the business performance.

The telco issued a statement to shareholders today, announcing it expects to make a non-cash impairment and write down the carrying value of Ooyala following its completion of its impairment testing process for the half year ended 31 December 2017.

As part of the writedown, Telstra has said it will look to exit the underperforming Ad Tech business of Ooyalla while maintaining the operation of its OVP (video player) division and the workflow management system business.

This latest writedown, in the face of what Telstra says is changing market conditions, follows an initial writedown of $246 million 18 months ago.

Telstra says it expects to recognise an impairment charge of $273 million against goodwill and other non-current assets in its results for that period to write the company value down to zero, subject to Audit and Risk Committee and Board review and approval.

Telstra acquired 9% of Ooyala in 2012, increasing its holding to 98% in 2014 as part of a broader strategy to provide end-to-end solutions for broadcasters and over-the-top companies.

Telstra identified challenges in the business and changing market dynamics 18 months ago and impaired the business at the time of its 2016 results.

Telstra Group Executive Technology, Innovation and Strategy, Stephen Elop, who is also chairman of the Ooyala Board, said there had been substantial efforts over the past 18 months to improve the business performance.  

“This was a business that Telstra purchased when the market dynamics were very different.  When we announced the initial impairment 18 months ago we indicated that we would be working closely with the team to turn around the performance. We believed Ooyala remained a young and exciting company with leading offerings in intelligent video which were continuing to evolve and scale,” Elop said.

“While some of these initiatives have been successful, the market has continued to change.

“There are three key parts of the Ooyala business – ad tech, OVP (video player) and a workflow management system (Flex media logistics). Ad tech has not performed well and we will therefore seek ways to exit that part of the business.  

“Importantly we do see a future in the other core parts of the Ooyala business – video player and the workflow management system. The new Ooyala management team is making positive progress through improved booking trends, product quality and reduced customer churn. However the business has yet to achieve sufficient scale.

“We nevertheless believe it is appropriate to impair all of the goodwill associated with the business. From here we will sharpen Ooyala’s focus by exiting ad tech and focusing on the underlying video platform and continuing to serve our customers. We will increase emphasis on our differentiated Flex media logistics product and we will drive operational efficiencies and leverage our go to market partnerships with companies such as Microsoft.

“In addition we will remain alert for broader strategic options for Ooyala in a market fragmented across multiple providers.”

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Peter Dinham

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

 

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