Tut Systems has significantly expanded its product portfolio by acquiring Tektronix subsidiary VideoTele.com [VT.c] for about $7 million. The merger, which was approved by both Tut and Tektronix boards, calls for Tut to give Tektronix 19.9% of its common stock and a five-year note.

In return, Tut gets VideoTele.com’s digital video headend and video trunking products and entrée to the company’s independent telco customer base. Tut had been–and will continue to be–focused on the multi-tenant unit [MTU] space, including the hospitality industry. VT.c, which brings about 60 employees, opens doors in the video-over-DSL market.

“VideoTel is the industry leader with the independent telephone companies for commercial digital headend deployments,” D’Auria said. “Combined, VideoTel and Tut have sold systems for lab or field evaluation to several ILECs and PTTs and were are jointly bidding for major video deployments as we speak.”

D’Auria emphasized that VT.c’s video trunking was an important component in the transaction.

“I think there is a great opportunity in that product line … with the increased emphasis on security around the world.”

Separately, Tut said its third quarter results included a net loss of $5.9 million or 35 cents per share compared with $49.8 million or $3.05 per share in the same period in 2001. Third quarter revenue was $2 million, compared to $4 million a year ago.

The company’s future looks bright, D’Auria said.

“This all points to a strategic turning point for Tut that begins with growth in Q4 and supports an exciting business plan for 2003 that I believe will be cash-flow positive by the end of 2003,” he said.

He based his forecast on a 50% quarter–to-quarter increase in activity related to requests-for-proposals and bids for hotels from PBX and IT systems integrators looking to expand offerings with high-speed Internet access.

“In the U.S. we’re seeing interest from a major ILEC and a major MSO in the hospitality market,” he said.