Company Logo Friday, November 15, 2002

VideoLocus bought by California Firm; Waterloo high-tech startup will develop video compression for home media group


WATERLOO -- A Waterloo high-tech startup that carried on the "PixStream dream" after PixStream was shut down has been acquired by a big U.S. company.

VideoLocus, launched 18 months ago by four former employees of PixStream, has been purchased by LSI Logic Corporation, a California company that makes semiconductors for communications, network storage and consumer electronics applications.

It will remain in Waterloo and report to LSI's home media products division.

The terms of the deal weren't disclosed, but it appears VideoLocus' 14 employees were well rewarded for the work they put into developing the business.

"Put it this way, it is going to be a nice Christmas for a lot of folks and there are a few more millionaires in town," said
Tim Jackson, a partner with Tech Capital Partners, the Waterloo-based venture capital company that provided seed financing for VideoLocus.

VideoLocus develops video compression technology that dramatically increases the amount of video that can be stored or transmitted.

LSI, a publicly traded company on the New York Stock Exchange, said the technology will bolster the products it can offer to its customers in the DVD and set-top broadcasting segments.

"We do acquisitions that bring to the company trend-setting technology coupled with engineering talent that is very familiar with the technology," said LSI spokesman Kevin Brett.

"The VideoLocus deal is the perfect example of that."

LSI gives VideoLocus access to its customer base and sales channels, as well as the resources to invest in continued product development, said Mate Prgin, the firm's president and chief executive officer.

"They were just missing the technology so it is a good marriage."

Prgin said the deal is gratifying, not only because of the money the employees will receive, but also because of their experience at PixStream, a video networking business that was shut down by Cisco Systems just a few months after Cisco bought it.

"This deal is really rewarding because it preserves some of the vision that was started at PixStream and it keeps the talent here in Waterloo," he said.

Jackson said LSI's purchase of VideoLocus is much more solid than Cisco's acquisition of PixStream because Cisco bought PixStream before the telecommunications industry went into a tailspin.

"You now have someone buying who knows what the market conditions are," he said. "Anyone who is buying in this climate must be making a really strong business decision."

LSI, founded in 1981, reported sales of $1.8 billion US last year.

It has 5,500 employees, including about 20 in a design centre in Kanata.

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