Cisco quits set-top box market, sells business to Technicolor

Cisco is selling its Connected Devices business -- yet at the same time counting on connecting billions of devices

After ten years of making networked set-top boxes, Cisco Systems plans to quit the business, selling its Connected Devices division to French firm Technicolor, the companies said Thursday.

Although Cisco will stop making video customer premises equipment for service providers, it will continue to develop software and cloud services to help telcos deliver IPTV and other video services to their customers, Cisco's business development director Hilton Romanski wrote in a blog post.

The companies plan to collaborate on developing video products for service providers, he wrote, and that collaboration will include Romanski taking a seat on Technicolor's board.

Technicolor is already a major player in this market, but acquiring Cisco's video CPE business will double its revenue in the segment to around €3 billion, it said. That revenue will come from shipping around 60 million set-top boxes and home gateways each year, building on an installed base of about 290 million set-top-boxes and 185 million gateways, it said.

The companies expect to close the sale, for €550 million (US$600 million) in cash and stock, by the end of January.

Giving up a foothold in customers' homes with the sale of its Connected Devices division, just as the Internet of Things market is warming up, may seem a strange move for Cisco, which has a lot to say about the "Internet of Everything" these days.

While some "things" are powerful enough and connected enough to find their way to the Internet through any old Wi-Fi router, many others are not. Small sensor-based devices with tiny batteries communicate via low-power radio systems such as Z-wave, Zigbee or Bluetooth Smart, and require a matching gateway close by to help them connect to the Internet.

Telcos are increasingly asking their suppliers to build such technologies into their home gateways, allowing them to offer own-brand ranges of home security and surveillance equipment, or energy-saving smart switches and lighting controllers. Meanwhile, other companies are battling to become the dominant home gateway provider, with the likes of Google, through its Nest subsidiary, striking deals with utilities to get its smart thermostats into customers' homes -- and then linking them up with smart smoke alarms, smart security cameras and other devices still to come.

But Cisco's Internet of everything pitch is more about providing the cloud infrastructure that allows such smart devices to talk to servers far away, rather than to other, similar devices nearby.

For Cisco and Technicolor, the motivation for the Connected Devices sale is more about relative profitability: Cisco is doing better overall than its video CPE business, and selling it off will boost Cisco's gross margin by one percentage point, Romanski wrote. Cisco generated earnings of $2.4 billion on revenue of $12.1 billion in its last fiscal quarter. Technicolor, on the other hand, is less than a sixth as profitable: On Thursday it reported half-year earnings of just €48 million -- almost double a year earlier -- on revenue of €1.6 billion. It expects the acquisition to boost its connected home earnings before interest, taxation, depreciation and amortisation (EBITDA) from €77 million in its last fiscal year to €200 million in the next.

Consumers touched by the deal may notice little more than a change of logo on the bottom of the box shipped by their telco -- unless that collaboration between Cisco and Technicolor results in a broader market for a particular low-power wireless gateway technology in the home.

Peter Sayer covers general technology breaking news for IDG News Service, with a special interest in open source software and related European intellectual property legislation. Send comments and news tips to Peter at peter_sayer@idg.com.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags Mergers and acquisitionsinternetbusiness issuesconsumer electronicsCisco SystemsInternet of ThingsTechnicolor

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.
Peter Sayer

Peter Sayer

IDG News Service
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

Logitech Ultimate Ears Wonderboom Bluetooth Speaker

Learn more >

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?