Cisco Wins European Approval of $5 Billion NDS Group Buy

European regulators said July 24 that the acquisition of NDS Group will not unfairly impact competition or hurt consumers.

Cisco Systems€™ $5 billion purchase of video software developer NDS Group was approved by the European Commission, clearing the way for the networking company€™s largest acquisition since it bought telepresence vendor Tandberg in 2010 for $3.3 billion.

The EC, the antitrust arm of the European Union, said in a statement issued July 24 that the deal would not unfairly tilt the pay-TV market in favor of Cisco to the disadvantage of either rivals or consumers.

€œThe Commission's investigation confirmed that the merged entity would continue to face competition from a number of strong competitors and that customers, namely pay-TV providers, would continue to have alternative suppliers in all markets concerned,€ the agency said in its statement.

In reviewing the proposed acquisition, European regulators said they looked at the impact on competition in both the hardware space€”such as set-top boxes€”and software, including conditional access systems (CAS), digital rights management (DRM) software, middleware, applications like digital video recording, and home provisioning software.

€œThere are only limited overlaps between the parties' activities in relation to each of these hardware and software products at the worldwide level, and these overlaps are even smaller in the European Economic Area,€ the EC said.

Cisco officials in March announced their intention to buy NDS, a British company partially owned by News Corp. that develops video software and security solutions to enable service providers and media companies to bring video to a host of devices, from traditional televisions and PCs to smartphones and tablets. NDS counts many major service providers and media companies€”including Cablevision and DirectTV€”as customers, both in the United States and in other countries.

Analysts at the time applauded the deal, noting that it will help fuel Cisco€™s intent to become a stronger presence in the booming video market. NDS will help bolster the company€™s Videoscape service, which enables users to find and watch pay TV content on multiple end points.

Cisco executives see video as a key growth opportunity that will not only add profits and revenue to the bottom line, but also soften any negative impacts from slowing revenue in the mature networking business. Video is one of several €œpillars€€”such as cloud and core networking€”that form the foundation of the company€™s plans going forward.

Given that, analysts in March said the NDS acquisition makes sense.

€œVideo has been one of the key pillars for Cisco,€ Zeus Kerravala, principal analyst for ZK Research, told eWEEK at the time. €œThis [deal] fits nicely with that.€

Analysts with Jefferies & Co. also noted that NDS will enable Cisco to broaden its reach in video outside of North America and into fast-growing emerging markets.

Cisco executives have said video will only grow in importance, and have predicted that within the next few years, video will account for 90 percent of all Internet traffic. By 2015, there will be 3 billion connected devices, from laptops to smartphones to tablets, according to the company€™s studies.

€œVideo will be the new voice,€ Cisco CEO John Chambers said in March when discussing the NDS deal. €œIt will be pervasive, on any device €¦ any time.€

The vendor has made significant investments in building up its capabilities around video, from buying set-top box maker Scientific-Atlanta in 2006 for $6.9 billion to the deal for Tandberg for $3.3 billion. Cisco also has made smaller deals, such as spending $99 million for video delivery software maker BNI Video.