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Lineo making acquisition in effort to expand into digital TV products

Lindon firm aims to buy company based in Germany

LINDON — Lineo Inc. sees an opportunity for its embedded systems in digital television products and on Tuesday announced an acquisition to capitalize on that opportunity.

The company has signed a letter of intent to acquire Germany-based Convergence Integrated Media, a developer of operating systems and software for digital communications products such as personal video recorders and DVD devices.

Lineo is using the move to become the first and only provider of Linux-based development tools for digital television products.

"We see tremendous growth and opportunity in this market," said Lineo chief executive officer Bryan Sparks. "We believe that Linux really can act as a standard platform for many digital TV services going forward."

Terms of the deal are not being disclosed, but Sparks said Lineo's Utah work force will be unchanged. Convergence offices will remain in Berlin, Amsterdam and San Francisco, he said. Convergence has 54 employees.

The merger is expected to help give embedded designers who provide interactive set-top digital TV boxes and other digital media content products the tools and applications they need, including operating system ports, drivers, consumer applications, development kits and training.

"We believe that the time for digital TV is now upon us, and over the next couple of years, we believe we will be able to ride this adoption curve with pretty good and high-quality technologies, and we think a good offering in this space," Sparks said.

"We believe that the combination of our two companies will allow us to bring Lineo to the forefront of suppliers on the client side of digital TV."

Lineo offers software, hardware reference designs and professional services designed to allow original equipment manufacturers to create devices and systems that interact with the Internet while helping the manufacturers reduce system requirements, per-unit costs and time to market.

Convergence has provided innovative DTV and digital video broadcast technology in the European market.

"Our goal has been to make the capabilities and benefits of DTV widely available," said Bernd Curanz, Convergence chief executive officer. "The coupling of this technology and resources is a major step forward to enabling OEMs to deliver highly interactive home communication systems."

Company officials said OEMs will be able to use the merged company's solutions in multimedia-enabled digital devices, including televisions, set-top and cable boxes and high-speed home Internet access devices.

Sparks said future opportunities abound. "We're not just looking to provide browsing functionality on digital TV," he said.

Curanz said applications might even extend to devices allowing more people to work from home.

One industry analyst has said that worldwide conversion from traditional analog broadcasts to digitally encoded transmissions could result in the digital set-top box market reaching $21 billion by 2005. The global installed base of digital set-top boxes is expected to increase from 44 million in 1999 to 339 million by 2005.

But the use of digital set-top boxes by satellite and cable operators will be a key to strong market growth.