In the latest consolidation among internet protocol television vendors, Tandberg is to acquire SkyStream Networks, a competing provider of video compression systems, based in Sunnyvale, California.

Under the terms of the agreement, Tandberg Television will acquire the privately-held SkyStream for $80 million in cash and Tandberg Television shares. The transaction is expected to close in April.

Founded in 1996, SkyStream has around 100 staff and became profitable at the end of 2005, with revenues of $30 million. The valuation is comparatively low, considering the venture capital that has been invested in the company, but offers scope for expansion.

The acquisition enhances the position of Tandberg as a leading in digital video delivery, expanding its presence in the IPTV market with what it terms a ‘complementary product set’.

Tandberg says the combination of the two companies will create a global leader in the rapidly expanding IPTV market.

“The sands are shifting in the digital media market and there is an inevitable level of industry consolidation taking place. In a marketplace with a number of acquisition opportunities to pursue, we chose to acquire SkyStream because of the company’s best-in-class technologies and its strong culture of building revenue and profitable growth,” said Eric Cooney, chief executive of Tandberg Television.

“Tandberg Television because we were excited about being part of its customer-driven expansion and it was clear that we share a strong business and cultural identity and a common vision for the future of video entertainment,” responded James Olson, the chief executive of SkyStream.

While Tandberg has to date concentrated on the high end of the market, SkyStream has been successful in smaller video headends. Its high-density, cost-effective MPEG-2 and MPEG-4 encoding and transcoding products are widely deployed by network operators in Asia, Europe and the United States. Customers include EchoStar, Eutelsat, GlobeCast, Comcast, Belgacom and Telecom Italia.

The SkyStream zBand delivery software for push video-on-demand services also complements the previous acquisition by Tandberg of N2 Broadband, another provider of video-on-demand solutions.

Tandberg Television is listed on the Norwegian stock market in Oslo, but is based in England and an expanding presence in the United States. The company recently acquired interactive television company GoldPocket Interactive.