Cisco bets $6.9bn on IP television

Cisco Systems has acquired Scientific Atlanta for $6.9bn in cash

Cisco Systems has paid $6.9bn in cash for Scientific Atlanta, one of the world's largest makers of TV set-top boxes and equipment to deliver video signals. 

The firm is also a major manufacturer of white label personal video recorders (PVRs) which it sells to service providers. A PVR uses a hard drive to store and play back television shows.

"Video is becoming critical not only to traditional video providers but to new providers like telcos," said Dan Scheinman, senior vice president of corporate development at Cisco.

"Scientific Atlanta's video expertise combined with Cisco's internet expertise is going to lead to a combination to deliver customers new services and high quality video."

A study by the Yankee Group earlier this year predicted that consumers will see a large push by service providers towards IP television (IPTV) by the end of 2007 or the start of 2008. Scheinman even expects that the market could be ready as soon as next year. 

Ken Rehbehn, research director for telecoms infrastructure at analyst firm Current Analysis, called the timing "perfect" for Cisco.

DSL providers are starting to move into IPTV, while traditional cable TV providers are starting to look at internet technologies to deliver video on demand.

The acquisition of Scientific Atlanta allows Cisco to hit the road running in the video delivery market, while Cisco's primary expertise is the field of IP networks.

"Scientific Atlanta has relations with a large number of cable and satellite television companies, and has the expertise for dealing with these issues. This is not something to grow on your own," Rehbehn told vnunet.com.

The acquisition marks IPTV as one of the first new 'advanced technologies' for Cisco. Chief executive John Chambers announced earlier this year that the company is looking to add four of these "advanced technologies" in its current fiscal year to 30 July 2006.

In Cisco's vocabulary 'advanced technologies' form part of a product group that has the potential to reach $1bn in annual sales, and will see a focus of the company's investments in research, acquisitions and partnerships.