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Instant Analysis: IBM Acquires UStream

By Evan Niu, CFA - Jan 21, 2016 at 12:20PM

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Big Blue scoops up a live-streaming specialist -- much like Amazon did before it.

What happened?
Following some media speculation, IBM ( IBM -1.18% ) has confirmed that it has acquired Ustream. The livestreaming video service will help Big Blue strengthen its cloud video platform, and IBM will utilize the technology to help enterprise clients.

Ustream garners approximately 80 million viewers per month that tune in to various channels, and IBM estimates the total cloud-based video market at $105 billion. Financial terms were not disclosed, but The Wall Street Journal pegs the purchase price at $130 million.

Does it matter?
The deal comes just less than two years after ( AMZN -1.53% ) acquired Twitch for $970 million. Ustream is a much smaller livestreaming rival, but also has broader appeal beyond Twitch's specialty of livestreaming e-sports and video games.

Purchasing Ustream makes more sense for a company like IBM, since it has little need for a consumer brand like Twitch. IBM is all about the enterprise, and making a targeted acquisition with a smaller price tag will allow it to get the underlying livestreaming technology that it wants and redeploy that technology to its core customer base of enterprise clients.

While IBM and Amazon continue to compete in the market for cloud-computing services and infrastructure, this purchase technically means they now compete in another (relatively small) arena.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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