Cisco heads for home

Networking giant Cisco is splashing out a cool US$6.9 billion cash to snap up set-top box vendor Scientific-Atlanta. The latest mammoth acquisition plunges Cisco into the home entertainment solutions market, underlining the vendor’s long-term desire to capitalise on growth opportunities outside its core routing and switching business.

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By  Stuart Wilson Published  November 19, 2005

Networking giant Cisco is splashing out a cool US$6.9 billion cash to snap up set-top box vendor Scientific-Atlanta. The latest mammoth acquisition plunges Cisco into the home entertainment solutions market, underlining the vendor’s long-term desire to capitalise on growth opportunities outside its core routing and switching business. Scientific-Atlanta is also a force to be reckoned with in the end-to-end video distribution networks space and video systems integration arena. Cisco reckons that its latest purchase gives it the ability to supply complete end-to-end triple play solutions for networks and the home. “Video is emerging as the key strategic application in the service provider triple play bundle of consumer entertainment, communication and online services,” said John Chambers, president and chief executive officer of Cisco. “The combination of Cisco and Scientific-Atlanta brings unmatched experience and innovation in delivering large scale video systems and networks, and the addition of Scientific-Atlanta further extends Cisco’s commitment to and leadership in the service provider market. Moreover, Cisco’s international presence and IP leadership will also create strategic synergies that accelerate the combined growth opportunity,” he added. Chambers continued: “As consumers demand more sophisticated information and entertainment services in their home, tightly coupled applications, devices and networks will be essential. The collective strength of Linksys and Scientific-Atlanta will extend Cisco’s leadership position across the entire networked digital home.” Cisco claims that Scientific-Atlanta’s technologies and platforms, coupled with Cisco’s own IP next generation network architecture, will offer providers an open platform for service differentiation, allowing them to move beyond video and IPTV to develop and deliver a variety of integrated media services in the connected home. “We believe that this combination of Cisco and Scientific-Atlanta will benefit our shareholders, our customers and our employees,” said Jim McDonald, chairman, chief executive officer and president at Scientific-Atlanta. “The combined strengths and resources of our two companies will position us to address more quickly the growing number of opportunities in the markets we serve and enable us to create new products and services that might not have existed otherwise.” Prior to the deal closing, Cisco and Scientific-Atlanta will operate as separate business entities and will continue to work with their existing partners. Once the transaction is closed, Cisco is committed to retaining the relationships and go-to-market strategies that both companies have developed. Once the deal has closed, Scientific-Atlanta, which has more than 7,500 employees, will become part of Cisco’s routing and service provider technology group, led by Cisco senior VP Mike Volpi. Scientific-Atlanta boosted sales of US$1.91 billion for the year ending July 2005. The net cost of the purchase for Cisco is US$5.3bn once Scientific-Atlanta’s cash balance has been deducted from the total price. Set-top boxes have the potential to become the central device for end-users to receive content from a variety of sources into their home. Cisco’s decision to acquire Scientific-Atlanta gives it the opportunity to work alongside telcos, cable and satellite companies developing one-stop-shop service packages comprising telephone, video and internet services for consumers. In the set-top box market, Scientific-Atlanta competes against Motorola and a number of other smaller companies.

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