Cisco executives say the acquisition will bolster the company’s presence in the video market and add to the capabilities of its networking business.
Cisco Systems executives say their deal to buy NDS Group for
$5 billion will not only make the company a larger player in the video
communications space, but also is further proof that, in a world of cloud
computing and ubiquitous connectivity, networks are key.
Cisco on March 15 announced its intent to by the
British-based NDS, which offers set-top box software and services to a host of
cable and satellite operators worldwide, including such companies as DirectTV,
Cox Communications and Cablevision.
The move marks Ciscos most significant video-related
acquisition since the company bought rival telepresence vendor Tandberg for
$3.3 billion last year, and the largest since its bought cable set-top box
maker Scientific-Atlanta for $6.9 billion in 2006.
It also comes less than a year after Cisco spent $99 million to
buy BNI Video,
a small Massachusetts firm that made video-delivery software
for service providers.
The NDS deal also will give Cisco greater expertise in
software and professional services, Cisco President and CEO John Chambers said
during a Webcast discussion of the acquisition.
NDS, which earned $252 million on $1 billion in revenue in
2011, offers a variety of video software and security solutions aimed at
enabling service providers and media companies to bring video to a host of
devices beyond the traditional television, including PCs, smartphones and
tablets. Its offerings dovetail with efforts Cisco has been making in the
video space, particularly with its Videoscape offering,
which was released
in January 2011. Videoscape, which spans the network, cloud and consumer
devices, is sold to service providers and enables consumers to find and watch
pay television content on their choice of devices.
While clearly a substantial acquisition and
major landmark in Ciscos history in its own right, todays acquisition is the
latest in a series of milestones for Ciscos Videoscape strategy, Marthin De
Beer, senior vice president of video and collaboration at Cisco, wrote in a
post on Ciscos
. Videoscape is Ciscos vision and
platform for the creation of new visual, mobile and social video entertainment
experiences through the convergence of digital TV, online content, and social
media and video communications applications.
The NDS acquisition, which is expected to close in the second
half of 2012, further illustrates the changing nature of video entertainment,
where consumers are increasingly demanding to be able to access high-quality
video wherever and whenever they want.
Video will be the new voice, Chambers said. It will be
pervasive, on any device ¦ any time.
Abe Peled, executive chairman of NDS and who will become senior vice president and chief strategist for Cisco's
Video and Collaboration Group, agreed. He said, The service provider business
is currently undergoing tremendous change. Where once a few companies ruled the
market with what Peled called a cozy relationship, there are now more
competitors. This offers greater options for consumers and opportunities for
vendors like Cisco.
And for Cisco, video is increasingly
important. Video is among the five pillars that underpin Ciscos direction
moving forward, Chambers said, noting that it will soon represent 90 percent of
all Internet traffic. In addition, by 2015, Cisco is predicting there will be
15 billion connected devices in the world.
Ciscos De Beer said during the Webcast that adding NDS will
significantly expand Ciscos reach in the market. Where the networking giant is
now strong in established markets and in cable, NDS brings expertise in both
cable and satellite, as well as a large presence in emerging markets. Both he and Peled also noted the strong
user experience offered by NDS Snowflake interface, which gives consumers a
consistent experience across all devices.
NDS also brings a strong services business, particularly in
systems integration, which Peled said accounted for 18 percent of the companys
revenues last year.
Chambers noted that tying all this together are intelligent
networks, which are enabling everything from cloud computing to the delivery of
the video content.
Video and networking are two of the five business areas that
Cisco is pursuing, as mapped out last year. Cisco in 2010 floundered after
pushing into dozens of new markets, resulting in disappointing financial
results and market share gains by rivals like Hewlett-Packard and Juniper
Networks in the core switch and routing markets. Cisco reorganized its
businesses and its hierarchy last year in response.
Until the deal closes, Cisco and NDS will operate as separate
companies, according to Cisco. After the close, NDS 5,000 or so employees will
join Ciscos Service Provider Video Technology Group.