Cisco is coming to your living room

Cisco Friday announced it plans to branch out beyond enterprise networks with a proposed US$6.9 billion buyout of cable TV set-top box leader Scientific-Atlanta.

The move is an indication that Cisco intends to make home entertainment and video its next US$1 billion-a-year "Advanced Technology" opportunity. The company's idea being that Cisco is IP, IP is the foundation for next generation TV, so Cisco is TV.

"We believe TV content will drive huge growth of Internet traffic, with implications for the Internet's largest equipment vendor, Cisco," states Anton Wahlman of investment firm Needham and Co. "Cisco must better understand video, quickly."

If you look on your cable set-top box, you're likely to see SA' logo or that of Motorola -- the two companies that dominate the cable TV set-top box market. SA also makes headends, hubs, advanced encoding devices and digital content managers for service providers.

SA has installed about 56 million cable devices in the U.S., representing about 40 percent of the market.

The acquisition helps Cisco build an end-to-end portfolio of IP TV and "triple play" -- bundled voice, video and data services -- infrastructure for service providers. Cisco already had the routers, switches and cable modem termination systems for cable companies; it also recently acquired DVD home entertainment technology with its purchase of KiSS Technology of Denmark this summer.

Cisco now has a set-top box to provide interactive, on demand digital TV from consumers and, when combined with Cisco's Linksys consumer networking portfolio, a broadband router/gateway for other residential entertainment applications.

"A combined Cisco/SA is a full frontal assault to create telco products that integrate multiple services -- phone, broadband, and television -- from routers through set-tops inside the phone infrastructure," states market research firm Forrester Research.

"Video is emerging as the key strategic application in the service provider triple play bundle of consumer entertainment, communication and online services," Cisco President and CEO John Chambers said in a statement.

"As consumers demand more sophisticated information and entertainment services in their home, tightly coupled applications, devices and networks will be essential," Chambers continued.

Analysts say the deal indicates that traditional suppliers of enterprise networking equipment are looking for way to diversify.

The deal "has moved the networking equipment giant more deeply into the consumer market," states Susan Kalla, managing director of telecom and media research at Caris and Company, in a bulletin on the acquisition. "Consolidation among equipment players is intensifying as they are faced with slower sales in the enterprise market. Equipment manufacturers are looking to enter the booming ... consumer market for digital television and mobile video offerings."

Under the terms of the agreement, Cisco will pay US$43 per share in cash in exchange for each share of SA, and assume outstanding options, for an aggregate purchase price of approximately US$6.9 billion, or approximately US$5.3 billion net of SA's existing cash balance. This size of the deal matches Cisco's largest acquisition -- the US$6.9 billion purchase of metro optical transport vendor Cerent in 1999.

The acquisition of SA is expected to close in the third quarter of Cisco's fiscal year 2006. It's been approved by the board of directors of each company.

Following the close of the transaction, SA will become a division of the Routing and Service Provider Technology Group under the leadership of Cisco Senior Vice President Mike Volpi. SA CEO Jim McDonald will report to Volpi.

SA was founded in 1951. The company has more than 7500 employees. For FY2005, which ended July 1, 2005, Scientific-Atlanta reported a revenue of US$1.91 billion.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Jim Duffy

Network World
Show Comments

Cool Tech

SanDisk MicroSDXC™ for Nintendo® Switch™

Learn more >

Breitling Superocean Heritage Chronographe 44

Learn more >

Toys for Boys

Family Friendly

Panasonic 4K UHD Blu-Ray Player and Full HD Recorder with Netflix - UBT1GL-K

Learn more >

Stocking Stuffer

Razer DeathAdder Expert Ergonomic Gaming Mouse

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?