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Sonicblue Buying Sensory Science, ReplayTV

SANTA CLARA, CALIF. -Sonicblue, manufacturer of Rio-branded MP3 players, announced it is in the process of acquiring consumer electronics supplier Sensory Science and personal video recording service provider ReplayTV.

In the Sensory Science deal, Sonicblue has signed a definitive agreement to acquire the Scottsdale, Ariz.-based consumer electronics marketer in an all-stock transaction valued at $8 million. Sensory Science, which had been named Go-Video before expanding its role from Dual-Deck VCRs several years ago to digital audio and video entertainment products, will become a wholly owned Sonicblue subsidiary.

Sensory Science product offerings include Go-Video analog and digital products, California Audio Labs audio components, Rave-branded MP3 players and a television distribution partnership with Loewe.

The Rave MP3 player competes directly with Sonicblue’s Rio players.

“The acquisition of Sensory Science is in line with our new focus and should further solidify our position as a leader in the digital media and consumer device markets,” said Sonicblue chairman Ken Potashner. “This move will expand our high-end retail channel, strengthen our technology portfolio and broaden our product line. This acquisition will enable us to supplement our digital audio efforts with digital video devices and systems.”

Meanwhile, Sonicblue said it has signed a letter of intent to purchase hard-drive recording system developer ReplayTV by issuing an aggregate of 16 million shares of common stock, options and warrants valued at $120 million in exchange for all of ReplayTV’s outstanding equity interests, making ReplayTV a wholly owned subsidiary. The deal is still awaiting consummation of a definitive agreement and regulatory and ReplayTV stockholder approvals.

Potashner said the acquisition was attractive because of “the synergies, growth prospects and opportunities” ReplayTV presents. “With the addition of ReplayTV, we are well positioned to take the lead in networked home entertainment,” he said. “We also plan to partner with the leading content distributors to provide consumers with the best overall digital experience.”

Mountain View, Calif.-based ReplayTV is the inventor and creator of personal television and provides software technologies and service solutions to manufacturers of set-top boxes, DVRs, home-media servers and networked-entertainment appliances.

Faced with financial hurdles, ReplayTV late last year announced it would no longer market hardware for the ReplayTV system, and would instead license its technology to other manufacturers, such as Panasonic. It is also pursuing deals with cable and satellite TV programming providers while continuing to support the hard-drive recorder platform with related services and program guide data.

Sonicblue executives said they plan to put ReplayTV technology “into a series of products that we envision” while using the alliances the company has developed on the services end of the business, but they will not attempt to put ReplayTV into the personal video recording hardware market.

Sonicblue runs a global marketing operation focused on Internet-based entertainment technologies, including Rio digital audio players, HomeFree home-networking solutions and Diamond Internet-access products.

The company, formerly known as S3, purchased Diamond Multimedia two years ago and had been known as a leading supplier of PC video boards and S3 graphics chips before recently exiting that business.