Cisco CEO Chambers Says Set-Top Box Biz a Key to Video Plan: Report

Chambers told an Atlanta newspaper that the set-top box business, which had been rumored to be on the selling block, is an important part of Cisco’s larger video strategy.

Cisco Systems is in no hurry to sell its set-top box business, despite the networking giant€™s recent $5 billion bid to buy video software maker NDS Group, according to President and CEO John Chambers.

Speaking to the Atlanta Journal-Constitution recently, Chambers said video will remain a key business focus for Cisco, and that the workers at the vendor€™s set-top box business will be responsible for much of the hardware and software that handles the rapidly increasing video traffic.

Cisco is looking to leverage its core network switches and routers and its growing portfolio of video offerings to create solutions that enable businesses and consumers alike to get any video service they want at any time and on any device, he told the newspaper. The set-top box business, which Cisco inherited in 2006 when it bought Scientific Atlanta for $6.9 billion, will be a key part of that effort.

The business has been the subject of rumors that Cisco was considering selling it.

€œThis isn€™t [about] set-top boxes,€ Chambers said in the news story, published March 24. €œIt€™s how you bring video into the home, into wherever. This is right now our sweet spot for where we want to go.€

Cisco officials and others in the industry are expecting the amount of Internet traffic worldwide to explode over the next few years, and see video as the key driver. By 2015, there will be 3 billion Internet users and 15 billion network-connected devices, and 966 exabytes running over Internet networks, Cisco projected in its annual Visual Networking Index Forecast, released last summer.

Video will be what fuels that growth, and Cisco executives believe the company will play a central role.

€œVideo will be the new voice,€ Chambers said during a March 15 Webcast discussing the NDS deal. €œIt will be pervasive, on any device €¦ anytime.€

The NDS deal€”the largest for Cisco since Scientific-Atlanta€”will make Cisco a larger player in the video delivery market. NDS€™s video software and security solutions enable service providers and media companies to bring video to a variety of devices beyond traditional televisions, including PCs, tablets and smartphones. It dovetails with Cisco€™s Videoscape service, which is designed to enable consumers to find pay TV content that can run on their TVs and mobile devices.

When news of the deal broke this month, some analysts saw it as an opportunity for Cisco to sell its low-profit set-top box unit, a commodity business that they said seemed to conflict with Cisco€™s approach of using innovation as a way of separating itself from competitors.

€œThere's not really a lot of differentiation [in set-top boxes],€ Zeus Kerravala, principal analyst with ZK Research, told eWEEK at the time.

Others have echoed such sentiments. However, after the NDS deal was announced, Chambers said the set-top box business was important to Cisco€™s overall video strategy, and appeared to reiterate that during his discussion with the Journal-Constitution.

Cisco€™s core networking business still makes the most money for the company. Switches generated $3.6 billion in sales during the last financial quarter, while routers garnered more than $2 billion. However, revenues for both in the relatively mature networking market grew 8 percent, compared with the 23 percent increase in service provider video and 10 percent in collaboration, which also includes video.