• Boston Business Journal, Thursday, February 6, 2014 1:43 PM

Tech giant Ericsson has landed in Boston with its deal to acquire video software maker Azuki Systems, and now plans to build a major presence in the area through hiring and more local acquisitions, Azuki chairman Chris Lynch said Thursday.

Azuki -- whose co-founder and CEO is serial entrepreneur Cheng Wu -- employs 49 in Acton, Mass., and will serve as the basis for Ericsson's mobile video presence, Lynch said.

"They are already talking about doubling the office in Acton and opening an office in Kendall Square," he said. "What Cheng has managed to do is get another Fortune 1000 tech company moving into Boston, and that means more jobs and more acquisitions."

Lynch, a partner at Atlas Venture in Cambridge, previously led sales and marketing for Acton-based ArrowPoint Communications -- a company founded by Wu. ArrowPoint was acquired by Cisco (Nasdaq: CSCO) for $5.7 billion in 2000.

The financial terms of the Azuki acquisition were not disclosed, but Lynch said "it's a very good deal ... the return on investment was great."

Azuki had raised $36 million in venture funding since its founding in 2008. Lynch, an angel investor in the company from its early days, said he is "very happy with the return, and I know that employees and investors are as well."

Investors in the company included Kepha Partners of Waltham and Sigma Partners of Boston. Azuki last reported raising $4 million in October 2012.

Sweden-based Ericsson (Nasdaq: ERIC) is a provider of telecommunications equipment and services, and saw revenue of $33.8 billion in 2012.

The first acquisition for a major company in a new geographic area is "always hardest, and now we've got them," Lynch said. "The next deal is easier ... I wouldn't be surprised if over the next three years they buy five or six more companies (in Boston)."

Lynch cited the Boston area's strengths in mobile and analytics technologies as reasons that startups here could become acquisitions for Ericsson.

Ericsson is also "the premium buyer" for Azuki, Lynch said -- not just the one willing to pay the most.

"There was contention for (Azuki) from Cisco and Alcatel. If they'd paid more money, we'd have had to take those deals," Lynch said. "But (Ericsson) is the company best able to execute on the technology and build the business ... With the acquisition last year of Microsoft Mediaroom and now Azuki, this gives them a three to five year lead in the telco market to deliver mobile video services."

Azuki's software enables users to take a single video feed and distribute it into all platforms — including TV and mobile devices.

Customers have included HBO, which has used Azuki to support the HBO Go mobile application, and Showtime, which has used Azuki for the Showtime Anytime authentication service on the iPad.

From the Ericsson news release:

Azuki Systems extends Ericsson's leading TV and media portfolio which includes the recent addition of Mediaroom from Microsoft. Through the acquisition, Ericsson will accelerate the availability of new and compelling viewing experiences across a variety of devices and screens. In addition, Ericsson will gain additional key functionality related to the deployment of TV Anywhere services, including adaptive bit rate and content protection technologies. In addition, the acquisition brings a team of highly skilled software engineers from Azuki Systems.

Per Borgklint, Senior Vice President and Head of Business Unit Support Solutions at Ericsson, said: "We are executing on our TV&Media strategy and Azuki adds key technologies and capabilities to extend our market leadership position. Traditional TV is shifting rapidly towards TV Anywhere. Azuki Systems further positions Ericsson to help customers deliver on the Networked Society's global demand for customized and personalized media experiences that include content on any screen, any time across any network."

Cheng Wu, CEO and co-founder of Azuki Systems, said: "Service providers, content owners and broadcasters face a range of challenges as they race to make content available on any device. Through worldwide deployments of our proven next generation video delivery solution, we have helped accelerate deployment and monetization of TV Anywhere services. Continuing this work as part of Ericsson will ensure that customers globally will have the most advanced support as they aim to deliver the best services for their subscribers."

Azuki Systems was founded in 2008 and is based in Acton, MA. Its next-generation TV Anywhere solution combines the power of over-the-top video with the highest quality of user experience, personalization, content protection, scalability and reliability. It also enables multiple monetization options, beyond portals and authentication services. Its customers are cable operators, IPTV providers, mobile network operators and content owners. The company has 49 employees.

The acquisition is expected to close before the end of February, 2014, subject to customary closing conditions. Azuki Systems will be incorporated into Business Unit Support Solutions.

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