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The company's shares once soared to $245.75 at the height of the tech bubble. Now the Liberty Media-controlled interactive television software specialist is trading around $1.20 per share.

The company is in the midst of marshalling the resources and customer bases of two former rivals that it's buying at reduced prices in deals announced late last month.

OpenTV plans to pay up to $92 million in stock for ACTV (IATV: news, chart, profile) and has laid out another $100 million for Wink Communications.

The Wink deal closed early in October; ACTV is expected to get shareholder OKs by the end of the year.

OpenTV touts the moves as a way to grow its customer base to about 35 million households from 27 million via links to the biggest customers in the interactive TV space.

But it's a difficult process. In a move that illustrates the challenges faced by OpenTV, the company said Oct. 14 it would cut 315 jobs, or 47 percent of its work force as part of the Wink Communications acquisition.

Analyst Peter Ausnit of Deutsche Bank Securities dubbed the layoffs a "significant cost cutting move." But despite the boost to its balance sheet from downsizing, uncertainty hangs over OpenTV because of contractual obligations by WinkTV to pay distributors to push its technology, Ausnit said. OpenTV's cash burn rate is also a concern.

The person charged with putting all this together is OpenTV CEO James Ackerman, a former cable TV executive at A&E and Lifetime TV who joined BskyB in the late 1990s.

Ackerman was an OpenTV customer while running an interactive TV provider called BiB before he became CEO of the company in 2001.

In a recent interview with CBS.MarketWatch.com, Ackerman laid out plans to continue to grow its business beyond software to content and services. He hopes shopping and other transactions will increasingly take place on your TV. See interview with OpenTV CEO.

For now he says he's "focused on integration, execution and growing the business."

The key relationship for the company remains with Liberty Media, run by mogul John Malone.

Cash-rich Liberty (L: news, chart, profile) paid $185 million to gain a controlling interest in the company in May. Liberty also owned stakes in Wink Communications and ACTV.

But rather than bringing all three companies in-house, Liberty Media opted to group them under the OpenTV umbrella.

OpenTV's Ackerman said he has little or no direct involvement with Malone.

His contact person at Liberty Media is the head of Liberty Broadband Interactive Television, Peter Boyland, a former Gemstar executive named chairman of OpenTV earlier this year.

"Liberty understands that interactive TV will become a staple of TV," Ackerman said. While he focuses on daily operations, "Liberty will be eyeing other things, like any possible acquisitions."

The day-to-day business offers plenty of challenges.

Slow adoption

At the moment, investors and analysts are mostly indifferent to OpenTV (OPTV: news, chart, profile) largely because interactive TV has received cooler-than-expected interest in the U.S.

People here tend to turn to the Internet for transactions and gaming, and keep their TV for more passive entertainment.

Viewers in Europe have been faster to adopt OpenTV technology that powers channel surfing, shopping, choosing camera angles and replays during games, and participation in game shows.

Added to the soft demand for OpenTV stock is uncertainty hanging over its major customers including BskyB (BSY: news, chart, profile) and EchoStar (DISH: news, chart, profile).

They're both top-tier players, but the scuttled merger between EchoStar and DirecTV (GMH: news, chart, profile) is kicking up clouds in the sector.

Another woe in the interactive TV sector is Gemstar (GMSTE: news, chart, profile), which has had a disastrous year.

On top of all that are freshly disclosed accounting woes at TV software maker Liberate Technologies (LBRT: news, chart, profile). See story.

OpenTV's latest quarterly results haven't sparked fires either.

In August, OpenTV warned it won't achieve pro-forma profitability in the fourth quarter of this year as expected.

Revenue fell to $14.2 million from $22.8 million as pro-forma net loss grew to $16.4 million from $4.1 million. It ended the first half of the year with $166 million in cash, down from $189.5 million at the start of 2002.

For now, the Ausnit is not recommending purchase of the shares, but he's maintaining coverage of the company. Deutsche Bank carries a "hold" rating on the stock.

"The market opportunity exists, but the timing of when interactive TV will take off in the U.S. is difficult to predict," he said.

Although the future of the overall satellite TV industry - where the bulk of OpenTV's business now resides - is cloudy, the company may benefit through its close relationship with BskyB, a unit of News Corp. (NWS: news, chart, profile), he said.

News Corp. is seen as a possible winner in the merger breakup between EchoStar and DirecTV. If the company ends up gaining market share in the satellite industry machinations to come, OpenTV could get a lift, Ausnit said.

And the company is hoping that connections from its latest acquisitions will boost performance.

DirecTV, for example, will become a major client through its relationship with Wink. Comcast, Charter Communications, and Time Warner are also Wink customers.

ACTV brings targeted advertising technology into the mix as brands look for ways to circumvent devices made by Tivo (TIVO: news, chart, profile) and others to block out traditional TV ads.

Besides getting access to the client base of the acquired companies, OpenTV will use the rival technology to fill out its offerings to its existing customers such as BskyB.

Ace in the hand

Despite the red ink now and in the past, OpenTV has always had some powerful players behind it.

The company began in 1994 as a partnership between Sun Microsystems (SUNW: news, chart, profile) and Thomson Multimedia (TMS: news, chart, profile). It shipped its first products in 1996.

MIH Ltd. (MIHL: news, chart, profile) gained control of the company in 1997, and Sun remained a shareholder.

With such big players involved, OpenTV's IPO in November, 1999 at $20 per share, took off, only to quickly fade in 2000 after the dot com bubble deflated.

It's latest iteration, as an outside piece of Liberty is a vote of confidence in OpenTV, said Ian Olgeirson, senior analyst with Kagan World Media.

"It's a gamble, but a relatively inexpensive one," he said. "Liberty looks for bargains and buys when prices are low."

Not everything Malone touches turns into a blockbuster business however. For example, he made a losing bet on Teligent, a fixed wireless provider that later fell on hard times.

But no one would argue that Malone, with billions of Liberty cash at his disposal, is a powerful parent for OpenTV.

Institutional indifference

Institutional owners of OpenTV include Delta Lloyd Nuts Ohra, Granahan Investment Management, Gabelli Funds, Red Coast Capital Management and Altamira Management, according to Multex.

None returned phone calls seeking comment on their holdings in the company.

Don Yacktman, fund manager of the Yacktman Focused Fund (YAFFX: news, chart, profile), prefers to own shares of Liberty Media, which make up about 6.5 percent of the fund.

Yacktman told CBS.MarketWatch.com he likes Liberty because it amounts to a mutual fund of valuable media properties with strong management through Malone.

Yachtman dubbed the recent acquisitions by OpenTV as a "non-event" with no plans to buy shares of the TV software maker.

Services are key

OpenTV is hoping to apply successes here in the U.S. to service wins overseas.

In France, OpenTV worked with Noos, a major cable TV operator, to build subscription weather and news services that generated revenue.

It's also receiving revenue from PlayJam, its interactive gaming service used by BskyB and others.

To stoke transaction income, OpenTV inked a deal with Ticketmaster (TMCS: news, chart, profile) to sell concert and other event tickets through interactive TVs.

The big question remains whether interactive TV services will take off in the U.S.

Will Workman, columnist with TV Technology Magazine, said the cable TV industry is banking on it.

Services are already cropping up in the roughly 7 million EchoStar customers. Cable TV continues to flirt with services such as video on demand, which are steadily rolling out.

Workman compared the OpenTV move to Malone's profitable purchase of General Instrument in 1999, a satellite TV service provider to smaller cable TV operators.

In the case of OpenTV, it's a way for Liberty to leverage the digital set top boxes that more consumers are getting from their cable TV companies and satellite TV providers.

With the rise of personal video recorders made by Tivo (TIVO: news, chart, profile) and others, TV providers will rely more heavily on interactive TV software to push ads into programs themselves. ACTV - now part of OpenTV -- specializes in this technology.

Meanwhile, competitors in the interactive TV software space are in the "doldrums," Workman said. Rivals include Microsoft (MSFT: news, chart, profile), which has a line of Microsoft TV products.

"The cable TV wire is the fattest information pipe in the home, and if people start using it for more services to be delivered on platforms built by OpenTV it will see its fortunes rise," Workman said.

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