Sony Buys Sonic Foundry

Culver City, CA-based Sony Pictures Digital (SPD) is buying Sonic Foundry, a Madison, WI-based manufacturer/marketer of software for audio and video production, for $18 million in cash. The deal was struck in May and is expected to close this month.

Sony picks up all of Sonic Foundry’s physical assets and facilities (including offices in Los Angeles and Toronto), customer receivables, trade names, trademarks, and intellectual property. Sony will also assume obligations such as property leases and contracts related to the business. Don Levy, SPD senior vice president of marketing communications, says that Sony has yet to decide whether to drop the Sonic Foundry name. Sony does plan to keep the Madison headquarters intact, however, and will retain the operational and fulfillment arm of the business for now.

The relationship between the two companies dates back at least three years, says Levy, as Sony has been selling Sonic Foundry merchandise since 2000. Sonic Foundry’s proprietary products, which include the ACID, Sound Forge, and Vegas software programs, are what drew Sony to buy the cataloger.

For Sonic Foundry, the deal will enable it to pay off old debt. During the past few years it had become increasingly difficult for the cataloger to maintain market share, says its chief financial officer, Ken Minor. In 2002 it took out a $7 million loan to grow the business, “and the repayment provisions were such that they kicked in a year later,” he says. Due to the soft market, “there was concern from our auditors that repayment would not be possible,” so Sonic agreed to sell the business. After the sale goes through and the debt is paid off, we “expect approximately $15 million in cash, which will help to infuse the Sonic Foundry division,” Minor says.

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