Faced with losses and tough competition from much larger companies, Sonic Foundry has agreed to sell its desktop audio and music production product family to Sony Pictures Digital for US$18 million in cash and the assumption of certain liabilities and obligations, the companies announced Friday.
Products involved in the deal, which is subject to shareholder approval, include these: Acid music production software; Vegas multitrack audio and video editing system; and the Sound Forge audio editing program. Sony will continue to sell these products after the deal closes.
Sonic Foundry has about 190 employees, approximately 70 of whom will be transferred to Sony once the deal is complete.
Sonic Foundry will continue operations, focusing on Web-based, rich-media presentation and database software, according to Rimas Buinevicius, chairman and chief executive officer of Sonic Foundry. The company's MediaSite Live Web presentation and streaming video software product, on the market for about nine months, is the first in this new series, he said.
In addition to the Sony deal, Sonic Foundry has a $6 million agreement in the works to sell its Media Services unit, which performs digital media restoration and encoding work, Buinevicius said. He did not disclose the buyer involved in that deal, which has not been made final.
After receiving money for the desktop and Media Services deals and paying down debt, Sonic Foundry will have about $15 million cash on its balance sheet to continue operations, Buinevicius said. On Thursday the company reported a net loss for its second fiscal quarter, ended March 31, of $2.1 million, compared to a net loss of $2.9 million for the year-earlier quarter.
Sonic Foundry found it difficult to compete with larger companies such as Apple Computer, Adobe Systems and Avid Technology, which put out a variety of software that competes with different aspects of the Sonic Foundry desktop line, Buinevicius said.
"Anyone who knows this industry knows that it's tough to fight the whales; they have big marketing budgets. Their products do similar things, and without a big marketing budget, it's hard to get the message out to users about the types of things your product does that are different from what products from the big whales do," Buinevicius said.
"We'll stay on the cutting edge, in emerging markets that the bigger companies don't have a grip on yet," he said. The company's desktop software line was bringing in about $15 million a year in revenue, he said. MediaSite Live sales have a run rate that amounts to about $2 million a year, he said.
Sony had already worked with Sonic Foundry before reaching the agreement to buy its desktop line.
Sony Pictures Digital's Screenblast Movie Studio and Screenblast Music Studio video and music-mixing software products were based on Sonic Foundry technology, according to Don Levy, vice president of communications for Sony Pictures Digital.
"What we're seeing is a marketplace moving toward an increasing amount of personal media creation, with people becoming more and more fluent at digital media and skilled at producing digital video," Levy said.
Though Levy stressed Sony's interest in the expanding mass market for video editing and production, he also said the company intends to keep selling versions of the Sonic Foundry products aimed at professionals using high-end music and video tools.
"Sony has tremendous respect for the Sonic Foundry technology, and maintaining and expanding on it," Levy said. Sony Pictures Digital manages digital production and online assets of Sony Pictures Entertainment and is a subsidiary of Sony Corporation of America.
Sony plans to keep in Madison the personnel who will be transferred from Sonic Foundry, he said.
The deal is expected to close after Sonic Foundry's shareholder meeting some time in June, the companies said.