Google (GOOG) is buying video software firm On2 Technologies (ONT) for $106.5 million in a stock swap. That's a 57% premium, or $0.60 per share.
Update: Click here for our analysis on why Google bought On2. We think they will open-source On2's newest video tech in an effort to massively disrupt the Web video tech industry.
Earlier: On2 makes video compression and encoding software. YouTube will presumably be the primary beneficiary of the deal, but the longer-term possibilities are numerous: Google could be interested in shipping its own custom video technology, or perhaps it's interested in On2's technology for chips and embedded devices. (We've asked Google for details, and will update if we hear back.)
On2's technology was once the preferred video compression format for Adobe's (ADBE) Flash video. But two years ago, Adobe added support for a new, non-On2 video type -- called H.264 -- which On2 doesn't receive royalties for.
