News Analysis: Audemat Acquires APT's Codec Business

Principals See Synergies in the Deal; APT Branding, Manufacturing to Remain
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BORDEAUX, France The ultra-competitive audio codec marketplace is reacting to Audemat's acquisition of the broadcast equipment division of APT. It is a business deal involving prominent international brands that also enjoy a U.S. presence.

Industry observers said the agreement allows Audemat to add respected codec brands, including WorldCast and WorldNet, to its product lineup of RDS encoders, transmitters and monitoring equipment. APT meanwhile now will focus more on its algorithm business.

No terms or conditions of the sale were announced. It closed in March, officials with the companies said. Both firms are privately held.

"Audemat is very well regarded, so we are watching it closely," said Tom Hartnett, technical director for Comrex, a competitor to APT in the remote broadcasting segment. "In the past, European products have had a tough time here due to the low value dollar. Now that things are moderating, we're seeing more Euro codec activity."

Another competitor said APT had an aggressive sales force but has developed little traction in the United States. "Their codec products have typically been priced higher with fewer options," the source said. "However, APT has made some gains in the larger multiplexer category in this country, specifically targeting Harris' dominance with its Intraplex product line."

Harris officials declined to comment on Audemat's purchase of APT's broadcast division.

The Audemat Group is privately owned. It has 100 employees at its headquarters in southwestern France. Audemat executives said their company has been working towards providing turnkey solutions throughout the broadcast chain.

"The APT product line, which comprises award-winning IP audio codecs and multiplexers, complements our existing product line," said Bruno Rost, president of the Audemat Group. APT's audio codecs are used to deliver audio for AM, FM, HD Radio and multi-channel applications over a variety of telecom links including IP, ISDN, X.21 and E1/T1.

APT split biz ops

APT (Audio Processing Technology) was founded in 1989. Noel McKenna and Jon McClintock led a management buyout in 2005 from its former owner, Solid State Logic.

Earlier this year the company, based in Belfast, Ireland, split its business operations. It designated its broadcast equipment division as APT Ltd. while naming the parent holding company and licensing division APT Licensing Ltd. The latter is responsible for licensing the proprietary apt-X algorithm technology.

Now Audemat has acquired the broadcast hardware line, although those products will continue to be branded as APT. In essence, that portion of APT will become a division of Audemat Group, Rost said.

"The APT Ltd. team will keep responsibility of designing hardware and software codecs. However, some new products will be co-designed by Audemat and APT staff," Rost said.

APT had 38 employees working in management, engineering, sales, marketing and administrative staff at its Northern Ireland facility. Rost said he expects all of them will remain in place, even though the reorganization is not yet complete.

Rost specifically mentioned Kevin Campbell, APT's former vice president of North American operations, Mark Weir and Greg Massey as executive directors who will remain with APT Ltd. and lead the division.

The purchase saves Audemat years of R&D into developing its own line of codecs, Rost said.

"It takes years to build a reliable codec and even longer than that to build relationships with customers," Rost said.

Audemat has a recent history of pursuing expansion opportunities. It acquired Aztec and its RDS encoders and monitoring equipment in 2005. It added Ecreso transmitters in 2006; the next year it purchased Nortek, a small company dedicated to TV monitoring activities, Rost said.

APT and Audemat dealer networks are complementary and present some synergies, Rost said. Both companies have U.S. subsidiaries. Rost said the Audemat office in Miami will oversee developing sales in North America and South America.

APT's North America sales office in Watertown, Mass., remains open "for now," Rost said. The company didn't answer a query about who runs that office. we reported recently that Campbell has returned to Belfast. APT products will continue to be manufactured at its facility in Northern Ireland.

Rost acknowledged that the world economy is in ill health but said Audemat realizes the economy goes in cycles and hopes better times arrive soon.

"We purchased APT knowing that we must prepare for the end of the crisis during the crisis," he said.

Licensing

McClintock, president of APT Licensing Ltd., said the timing of the sale was good for he and business partner, McKenna, and the other shareholders, including Crescent Capital and Trinity Venture Capital, which are based in Ireland.

"Both businesses have a fundamentally different model in terms of business cycle. Licensing is very long-term and based around design time cycles, whereas hardware can be more immediate. As our codecs became more successful, we found that the licensing side suffered simply due to a lack of time resource."

McClintock said he and McKenna will continue to invest in audio compression R&D and step up its focus on efforts to license APT's proprietary algorithm apt-X into consumer electronics applications and professional audio markets.

"The money raised from this sale will allow us to invest into new algorithms, which will be exploited for radio, embedded audio for TV and consumer applications like Bluetooth," McClintock said. McKenna and McClintock have been with APT since 1994.

The technology now known as apt-X was developed in the 1980s by Dr. Stephen Smyth, who was studying for a doctorate at Queen's University, Belfast. Funding from the university and Solid State Logic in England was used to establish the company, according to its online history.

The original apt-X algorithm became known as Standard apt-X, McClintock said. The original algorithm was 16 bit 4 sub band ADPCM codec with a 4:1 compression ratio and a latency of 2.3 milliseconds. The company then launched Enhanced apt-X in 2000, which he said had better transient performance characteristics.

"Enhanced offered 16, 20 and 24 bit word depth with a 4:1 ratio but with improved latency of 1.98 milliseconds," McClintock said. "We launched apt-X live in 2007 with a compression ratio of 8:1 and retained low latency figures of under 2 milliseconds. It's far more bandwidth efficient."

McClintock said APT Licensing Ltd., which has found a niche in audio over IP, will launch apt-X Lossless by mid-2009. It has 15 employees and will continue to share the same 20,000-square-foot facility with APT Ltd. in Belfast.

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