BUSINESSWEEK ONLINE : FEBRUARY 19, 2001 ISSUE
BUSINESSWEEK E.BIZ -- EUROPEAN COVER STORY I-TV's Software Upstart (int'l edition) It reads like a movie script: Father develops groundbreaking technology. Family builds fortune based on the invention. Low-cost foreign rivals threaten family business. Son returns with new groundbreaking idea and builds company into technology leader again. It's not Hollywood, but the movies play a starring role in the saga of Switzerland's Kudelski Group--and television will be central to the plot from now on. Kudelski's main product: software that bills pay-TV subscribers and keeps those who haven't paid from seeing it. That has been a big seller as pay-per-view grows in Europe and beyond, and is getting even bigger with the takeoff of digital and interactive television. A program like Kudelski's is essential to TV commerce, letting I-TV broadcasters bill subscribers for online purchases without credit-card hassles. Investors applaud the story. Shares in Kudelski, based near Lausanne, Switzerland, have shot up tenfold in three years, to more than $1,200 a share. Why? The number of TV subscribers using Kudelski's software worldwide has skyrocketed from 5.6 million in 1998 to 19.3 million last year. Those numbers should keep climbing: Digital TV subscribers will double, to 116 million, over the next two years, says London consultancy Ovum Ltd. Kudelski's revenues grew to $210 million last year from $133 million in 1999, while operating profits more than doubled, to $54 million, according to Credit Suisse First Boston. Kudelski doesn't release full-year results until April. Kudelski's tale didn't always look so upbeat. Stefan Kudelski, a Polish emigre engineer, in 1959 invented a compact tape recorder that revolutionized moviemaking. Until then, filming on location had been prohibitively expensive because of the truckloads of equipment needed to get decent sound. Kudelski prospered for two decades. But by the late 1980s, Sony Corp. and other Asian competitors had nearly driven Kudelski out of business with lower-cost products. Enter Andre Kudelski, Stefan's eldest son. After a stint in Silicon Valley, Andre returned to Lausanne in 1986 believing software could save the company. Although the elder Kudelski was opposed, Andre proved his theory when a Swiss pay-TV station asked him to write billing software. In 1989, France's Canal+ bought Kudelski's program, eventually placing it in 7 million set-top boxes. With Canal+ on board, Kudelski won scores of other contracts with broadcasters worldwide. The advent of digital TV made Kudelski a star--although it nearly got the company written out of the plot again. Canal+ dropped Kudelski in favor of software developed in-house when it shifted to digital broadcasting. Despite the blow, Kudelski built new software for digital TV that analysts say is top-notch. It has since won dozens of customers, including U.S. satellite broadcaster EchoStar. Kudelski isn't alone in chasing such a lucrative market. But its chief rivals are NDS Group PLC, which has close ties to British Sky Broadcasting, and Canal+--both of which own systems worldwide. As the only independent, Kudelski is the supplier of choice for anyone competing with the two giants of the industry. If Kudelski can keep up its performance, this is one show that could be playing on a lot of TV sets. By William Echikson _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Europe's I-TV Advantage (int'l edition) TABLE: I Want My I-TV (int'l edition) ONLINE EXTRA: Q&A: BSkyB's Tony Ball: "We Will Compete with the PC Screen ONLINE EXTRA: Q&A: CanalSatellite's Bruno Delecour: "Our Digital Customers Spend Much More" I-TV's Software Upstart (int'l edition) ONLINE EXTRA: Q&A: Andre Kudelski: "Our Independence Is Our Strongest Force" Surfing by Boob Tube (int'l edition) ONLINE EXTRA: Q&A: Netgem's Joseph Haddad: "The TV Is a Simple Multimedia Device" INTERACT E-Mail to Business Week Online

Copyright 2000-2008, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use   Privacy Notice