Cisco had data, Cisco had voice, and what it needed was video to complete the triple play. So they bought Scientific Atlanta for $6.9 billion.
Cisco will pay $43 per share in cash in exchange for each share of Scientific-Atlanta, and assume outstanding options, for an aggregate purchase price of approximately $6.9 billion, or approximately $5.3 billion net of Scientific-Atlanta’s existing cash balance.
The reasons for the deal are many, the most important being that the company the size of Cisco might have a tough time growing revenues ($27 billion - fiscal 2006) in line with Wall Street’s double digit expectations without acquisitions. Scientific Atlanta will have sales of around $2.1 billion in fiscal 2006) This is the kind of deal that gives shares a bit of lift. As you might have noticed Cisco has been range bound for years now.
From a strategic point of view, Cisco needed to fill out its cable portfolio with customer premise gear. Scientific Atlanta with its set-top boxes is a good way to get deeper into cable networks. The company has supplied head-end gear and routers to companies like Comcast for a while now. The set-top box is turning out to be the trojan into digital homes. Combine this with Linksys, and things can certainly get interesting!
Zatz Not Funny writes: “. So how long before we see a cable company DVR with built-in cable modem, wireless router, and UPnP server?”
Motorola, while well known as a wireless company, is a massive player in the cable business, largely due to its General Instrument acquisition. It had the most complete offering so far, but now will have to contend with Cisco on a more serious level. Same goes for Microsoft which has been trying to make a place for itself in the IPTV networks. Thanks to Scientific Atlanta, Cisco can now start calling on Telecoms building out their Telco TV networks as well. SBC was supposedly working with Scientific Atlanta anyway. BellSouth is another Cisco partner that could now take SA more seriously.
More from The New York Times
What Cisco Gets from Scientific Atlanta: End-to-End Subscriber Systems, DVR & Non-DVR Set tops, HD & standard definition Set tops, System & Client Software, Cable HSD/Voice Modems, Home Networks, HFC Networks, Satellite Systems, Head-ends, and Network Manage
3 trackbacks so far
2:05 PM PT
Cisco wants into your TV
Despite its enormous size at $106-billion (U.S.) its market capitalization is just a little short of Google and a cash-rich balance sheet, networking equipment giant Cisco Systems has shied away from the kinds of giant shopping…
9:29 PM PT
[...] OM [...]
3:29 PM PT
[...] for a rich valuation as information technology companies seek to get a toehold in the home market; Cisco’s $6.9 billion buy of Scientific Atlanta is the most obvious example. Companies such as Dell and HP are eying the convergence of consumer [...]
10 comments so far
9:40 AM PT
Good post…and let’s not forget integrating VOIP.
9:53 AM PT
Cisco again yes integrating VOIP will be great !
10:08 AM PT
Given that it is cisco, i kinda assumesd the VoIP part. I think this is clearly end-to-end IP triple play. I think it is going tp be fun to see who ggets the better of the other…. Moto or Cisco
11:24 AM PT
This move by Cisco is probably going to force the cablecos to finally upgrade their networks to full IP… which, of course, will spur another capx spending cycle for Cisco.
11:51 AM PT
I think VoIP stack will be part of the OS. The DVR is nice but not kewl and certainly not worth the price they paid. Well the Redmond company will give you much more control on your box by means of software solutions.
11:52 AM PT
End to end == sounds very close to vertically integrated — aka p-r-o-p-r-i-e-t-a-r-y. All they need to do now is buy a network (like Corvis did) and we’ll have AT&T.
2:04 PM PT
Om:
I think you’re right that the Cisco Scientific-Atlanta deal could be the start of something big — IPTV, VOIP and all sorts of things built into a smart set-top box — at the same time as it is a quest for growth by Cisco. I posted a column about it at (my blog, which is the online version of my column at link) .
Mathew Ingram
11:45 PM PT
Cramer today told one of his investors that CISCO paid too much for this old second grade technology company. I think CISCO shot itself in the foot.
11:32 AM PT
I bet the broadband companies will keep them from making too much progress!
9:43 AM PT
A New-Co start-up with the right syndication of capital partners and the rest of the right stuff, could sink both their ships in the triple play with the ‘right business model’, or one would make them rich as the exit strategy would be a quick M & A by Motorola or Cisco to protect what is surely going to be the next super play in the evolving game over eyeballs and their wallets, like never before.
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