Compared to many online video firms, Sorenson Media is a veteran of the industry, lasting 14 years mainly on the strength of its Spark codec and encoding business. But despite its longevity and a healthy balance sheet, the company a significant shareholder is looking to sell its stake due to potential tax liabilities associated with the Sorenson Media assets if they are transferred to a non-profit organization.
Confused? Let me explain.
Sorenson Media is just one of many businesses that were spawned by Salt Lake City-based inventor and serial entrepreneur James Sorenson, Sr. When Sorenson passed away in 2008, the plan was for all of his remaining assets — including Sorenson Media — to be passed into the hands of a non-profit organization called the Sorenson Legacy Foundation, whose mission is to support a number of charitable, artistic, religious, educational, literary and scientific endeavors.
Sorenson himself was an interesting guy: he co-developed the first real-time computerized heart monitoring systems and invented a wide range of useful health care tools, such as disposable surgical masks, non-invasive intravenous catheters, and blood-recycling and -infusion systems, scoring some 40 patents along the way. Sorenson Media’s codec business was originally created for the digitization of medical records, according to now-CEO Peter Csathy, but the company found applications for its technology in the media and entertainment industry, where its business really took off.
Sorenson has built a pretty strong business on codec licensing and encoding software since then. But because it is a for-profit business, being transferred into a non-profit entity has serious tax liabilities. As a result, Csathy says the trust is exploring alternatives for its shares, which could include acquisition by an outside firm. “The company is very successful,” Csathy says. “We have a very healthy balance sheet, but our shareholders are exploring alternatives for these tax-driven reasons.”
Csathy joined the company as CEO about a year ago, taking over for Jim Sorenson, Jr., who remains chairman of the board. Prior to joining Sorenson, Csathy had sold video chat startup SightSpeed to Logitech, so he has some merger and acquisition experience. Since he joined, Sorenson has rolled out an online video management platform called Sorenson 360 to augment its encoding business, competing with companies like Brightcove for the enterprise companies that need helping managing and publishing their videos online.
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