Telstra has decided to take a big hit on Ooyala, the US-based business it thought would become a global platform to stream content to websites and smartphones, writing down its investment of about $500 million to zero.
Australia’s biggest telco plans an impairment charge of $273 million against goodwill and other non-current assets. This follows an initial write down of $246 million 18 months ago.
Telstra acquired 9% of the Silicon Valley-based Ooyala in 2012 and increased its holding to 98% in 2014.
At that time Telstra had a vision to deliver digital TV and video content across any device to mass audiences, using analytics to provide recommendations, and personalised content and advertising.
“This was a business that Telstra purchased when the market dynamics were very different,” says Stephen Elop, Telstra Group Executive Technology, Innovation and Strategy, and the Chairman of Ooyala.
At one stage there were plans to float Ooyala in a massive stock exchange listing. “Our intent is to take the company public. Over time this will become a multi-billion market-cap business,” said Ooyala CEO Jay Fulcher in July 2015.
However, technology overtook the business.
Telstra’s Elop said today: “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.”
But the market has continued to change.
Telstra is now seeking ways to get out of the ad tech part of the Ooyala business. The video player and the workflow management system of Ooyala will stay.
“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,” says Elop.
“We nevertheless believe it is appropriate to impair all of the goodwill associated with the business.”
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