Onstream Media To Acquire Narrowstep: I Don’t See The Synergy

Today, Onstream Media announced that it had agreed to acquire IPTV based platform provider Narrowstep in an all stock transaction. Shareholders of Narrowstep will receive 11.1 million shares of Onstream Media common stock plus have the opportunity to earn additional shares based on reaching future sales targets.

For 2007, Narrowstep had about $6 million in sales and total operating expenses were over $16 million, much of which was spent on the buildout of their own content delivery network. At the end of November of 2007, Narrowstep had about $6.5 million in cash and had started to shop the company. At their current burn rate, Narrowstep was close to having to raise another round this quarter in order to stay open.

Onstream Media, which is on a run rate to do between $15-20 million for 2008, and has a current market cap of around $40 million, gets more than 75% of its revenue from webcasting related services. On paper, this acquisition is an odd combination since Onstream Media is really in the services business and Narrowstep is in the software and platform business. Both companies have two very different business models and very different customers, in different regions of the world.