Digeo, Moxi Heat Up iTV Space

In one of the highest profile maneuvers in the digital set-top box space for quite some time, Digeo Inc. and much ballyhooed newcomer Moxi Digital Inc. announced Friday that they will merge.

The merger is intended to speed the development and delivery of advanced media center platforms and iTV services by bringing together most of the components needed to make them a reality.

Kirkland, Wash.-based Digeo, chaired by Paul Allen and funded by Allen’s Charter Communications Inc. and his investment vehicle, Vulcan Ventures Inc., also has ties to satellite operator EchoStar Communications. Vulcan plans an additional investment as a result of the merger.

Meanwhile, Palo Alto, Calif.-based Moxi, founded by Steve Perlman (who founded WebTV Networks in 1997 before selling to Microsoft in 1997), brings its Media Center to the table. Moxi showed off the platform, which wirelessly delivers services to set-top boxes, stereos and PCs, at CES in January.

Digeo said it brings expertise in back-end infrastructure and operations necessary to deploy services in a subscriber’s home, garnered through the rapid deployment of its Basic iTV service, to the table while Moxi adds a robust platform — capable of managing the routing of multiple media streams throughout the home — to the mix.

The companies did not reveal the terms of the transaction. However, the combined company will be called Digeo. Allen will chair the company, with Digeo Chief Executive Officer Jim Billmaier (also on the board), retaining his position at the combined company. Moxi CEO Rita Brogley will become the executive vice president of business development and market, while Larry Weber, Digeo president of Advanced Systems, will continue in his present role. Digeo Senior Vice President Bert Kolde will become the new company’s chief operating officer, while Toby Farrand, Moxi vice president of Engineering, will take the chief technology officer position.

The board will be rounded out by Charter CEO Carl Vogel, Vulcan President William Savoy, Vulcan Senior Investment Analyst Edward Harris, and Mayfield General Partner Kevin Fong.

“This merger will allow us to deliver a family of media center platforms more rapidly,” Allen said. “Besides having the power of a PC, they are incredibly easy-to-use and can also run many exciting new applications that range from personal video recording to digital photo sharing to wireless home networking. Their introduction will define a new benchmark for the next generation of set-top boxes.”

It may also be a challenge to Allen’s fellow Microsoft co-founder, Bill Gates. Despite a deal between Microsoft and Charter sealed last fall, Charter has delayed plans to roll out Microsoft’s iTV product. Meanwhile, Digeo said Friday that Charter plans to begin a rapid deployment this year of its advanced media center platform — developed jointly with Motorola Inc. Charter has already deployed Digeo’s Basic iTV service to more than 558,000 homes.

“This merger is a win-win situation for the consumer and cable industry alike,” said Charter’s Vogel. “By combining the respective strengths of each company, Digeo will provide us with a platform far superior to today’s advanced boxes, enabling us to continue to lead the industry in delivering a rich, engaging experience to customers.”

The two companies plan to integrate their products and technologies over the coming months, forming a single, unified offering.

“Digeo and Moxi have been working along parallel paths to implement very similar visions,” Digeo’s Billmaier said. “Integration of the two companies will be swift, our efforts will be amplified, and we’ll deliver an even better media center platform to market sooner. We believe these new platforms will be very attractive to cable and satellite companies looking for new revenue opportunities.”

The two companies plan to maintain dual headquarters in Kirkland and Palo Alto, and will hold onto their combined complement of 328 employees. Together, the companies have 278 patents, pending and awarded, covering areas related to delivering advanced home entertainment services.

In addition to Vulcan, Charter and EchoStar, Digeo is backed by AOL Time Warner, The Barksdale Group, Cisco, Macromedia, Mayfield and The Washington Post Company.

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