Google Buys GIPS - Here's Why

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Google Buys GIPS - Here's Why

When it comes to enabling technology, Google's new mantra is its better to be needed than liked

I first met the company called Global IP Sound around 2002 at TMC's ITEXPO and Pulvermedia's VON expos. What differentiated the company tome at first was the company's ability to power wireless VoIP calls over PDAs - specifically Compaq iPAQs via a low-bandwidth codec. As you can imagine, at the time, the codec needed to not only be low-bandwidth due to the slow wireless connections but also had to be super-optimized because processors in PDAs at the time were not powerful.

Over time the company supplied technology which allowed Skype to rapidly popularize its Internet telephony software and service. The company's narrowband iLBC codec is widely used and quite popular and its newer wideband codecs power HD voice solutions. A few years back the company broadened its focus to video and subsequently changed its name to Global IP Solutions.

The last time I was in the company's headquarters I had a chance to see how Yahoo Video Messenger used GIPS technology for high-quality video over IP communications.

We have established that the company supplies important component in high-quality voice and video conversations which take place over IP so why the purchase?

I'd like to first comment on an article the FT ran today explaining this acquisition is about competing with Skype - and in perhaps it is inasmuch as the company is buying technology which is used in voice and video calls. But how this purchase helps the competition with Skype is unclear other than removing some of the competitive technology in the market.

This purchase and Google's other purchase of codec company On2 remind me of Google's history in the search market. For many years, VCs and many in the media espoused the virtue of building web portals while search was relegated to the backseat. It was during these years that Yahoo decided to license search technology from Google while it focused on building out its portal strategy via email, horoscopes, a financial page, etc. In the end, the company with the best search technology won the day.

And collaboration over IP is where the market is heading and as it continues, voice and video technology which optimizes compression regardless of network quality is invaluable.

In fact to compete in the information technology space, collaboration has to be something you are great at. IBM has solutions in this space as do Microsoft and Cisco. This acquisition actually puts Google in the position of supplying codecs to its competition. Although the GIPS deal is cheap by tech M&A standards at just over $62M, I can't see Google picking up the company to make the competition come crawling to them. Then again, GIPS has access to much proprietary technology which powers some of the leading collaboration players in the market.

And one has to imagine the On2 deal has taught the search leader the value of owning codecs which major players in the market rely on. Remember, that companies making codecs often have solid patent portfolios as well and these assets are useful when getting sued as you can wield them as a weapon in patent countersuits. Anyone remember by the way the Apple suit HTC and Google are embroiled in (Apple suit, HTC countersuit)? Think there is some intellectual property here which Google can use to its advantage?

The final reason for this acquisition is simply to help Google in its conquest to maximize its chances in the video over IP space and by this I mean TV and YouTube on all mobile devices. Although I mention this close to last, advertising on video could potentially be the biggest reason for this deal. The launch of the iPad and the coming wave of Android-based tablets have likely shown the company how big a market entertainment on these devices will be.

Keith Woolcock has an article out today on the Seeking Alpha blog where he discusses the premature death of Google and the general idea is social media, apps and entertainment are consuming more and more of our time at the expense of search. If this is the case and you factor in YouTube's recent news about having 2 billion views per day, you realize there is even more potential for getting video on more platforms and devices.

One last point worth making is if I had to bet, I would say Google execs are walking around their campus with Android-powered tablets with built-in videoconferencing 24x7. Moreover, they are thrilled with what they see and they feel productivity is skyrocketing. As a result they realize the value of companies making codecs to supply these devices will skyrocket. This acquisition not only allows the company to pick up an asset which will increase in value, it can be used to help defend hardware platforms which use Android and run the risk of being sued by Nokia, Apple and others. At the end of the day having healthy operating system competition is crucial for Google to have a viable business. A single dominant player could shun Google's services for an alternative and from Apple's perspective Google is probably a notch down on the friendship meter from Adobe at the moment. Apparently when it comes to enabling technology, Google's new mantra is its better to be needed than liked.

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That is a great insight. It will be interesting to see how Google actually brings out the best of GIPS. Google has not been too successful exploiting some of the acquisitions it has made in the past.

The other aspect would be to see the synergy that Google can reap between its existing businesses. Google can now incorporate these codecs and other technologies (e.g., Gizmo5, GV) into Android core and make Android a compelling offering.

Google has been steadily developing a portfolio of businesses that could strengthen its position in the Mobile telephony space.

The acquisition of Grandcentral was a perfect move in that direction. Then Google launched its own branded mobile phone - Nexus One. Then we have the acquisitions of Gizmo5 and GIPS. I thinks, Google is readying itself for a all out war in this space and (fortunately or unfortunately) is well placed to come out with flying colors.

Alok @ TruVoIPBuzz

2 reasons for the acquisition

1. to compete against skype
2. to provide proprietary technology and open to the world.

Everybody in the industry says that Google wants to control the core VoIP technology. Its bid for GIPS makes much sense in this respect. But what it means for the customers of GIPS, and some of them, by the way, are in direct competition with Google. It’s not unlikely they will be left with
limited or no support at all. Google will use VoIP as a platform in its Android OS, Google Chrome and probably in its Google Apps. Google will need GIPS’ expertise and engineering resource to back its VoIP strategies. SPIRIT DSP which successfully competed with GIPS over all these years is now the only independent VoIP technology company on the market. SPIRIT dislodged GIPS from Skype and was named among the Top 10 VoIP leaders by FierceVoIP. Today SPIRIT offers its VVoIP platform on a
variety of desktop and mobile platforms, supporting not only Google’s Android but iPhone,Symbian, Windows Mobile. SPIRIT offers a video server with 1000-channel capacity. Now SPIRIT is the number one choice for service providers, application developers, and telcos that are
deploying voice and video communication services.

The offer only got 70% shareholder acceptance and will have to be increased at least 25% in order to get 90% acceptance.

So odds are that Google will bow out, and GIPS remain independent.

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