Tech Firm Reports Lower Sales, Divests Assets For $23M

Qumu Corporation struck a deal to sell its Rimage disc-publishing business to focus exclusively on video content management software.

Edina-based Qumu Corporation recently reported a decline in first-quarter revenue and said it plans to sell its disc-publishing business for $23 million.

The divestiture is part of Qumu’s shift toward focusing exclusively on its video content management software business. In fact, Qumu was previously known as Rimage but last year adopted the moniker of its Qumu subsidiary, which it had purchased for $52 million in late 2011.

Whereas Qumu (then Rimage) previously focused primarily on providing on-demand CD, DVD, and Blu-ray Disc publishing systems, the company has cited a growing use of video among businesses for enterprise communication.

On Monday, the company said its first-quarter revenues fell to $18.8 million, compared to $19.5 million from the same period a year ago. Revenue from the Rimage disc-publishing brand dipped from $15.1 million to $14.9 million while Qumu software sales slid from $4.3 million to $3.9 million.

The company said, however, that backlog orders for its software products are increasing, which it expects will translate into higher sales and profitability—and it also recently announced that it reached an agreement to sell its Rimage disc publishing assets to Redwood Acquisition, Inc., a wholly owned subsidiary of Houston-based Equus Holdings, in an all-cash, $23 million deal. (Qumu said the terms are “subject to certain adjustments.”) Equus Holdings is a private equity firm whose portfolio spans multiple industries, from energy to media.

The deal is subject to closing conditions and Qumu shareholder approval, and the company said it expects to close the transaction by the end of July. A Monday call inquiring about whether the deal will impact Minnesota jobs was not immediately returned.

“Qumu software’s growth has been overshadowed by the declining revenue of our disc publishing operation,” President and CEO Sherman Black said in a statement. As a result, the company began last year exploring “strategic alternatives” for the business, the process identified “multiple potential acquirers,” and the Equus deal best benefits shareholders, Black said.

“The proposed transaction is estimated to provide Qumu with approximately $19 to $20 million in net cash after closing costs, post-closing adjustments, taxes, and the assumed return of the $2.3 million, 15 month escrow,” Black added. “Most importantly, it will enable us to concentrate our efforts and resources on the significant growth opportunity for our proprietary enterprise video software business. With a single focus on the growing software business, we have the potential to achieve improved value for our shareholders.”

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