Cisco Exits Scientific Atlanta Business with $600 Million Technicolor Sale
Set top box market has been a drag on Cisco's earnings and now it's on the way out.
Cisco is selling its connected devices to Technicolor in a deal valued at $600 million. The deal is currently is expected to close by the end of the fourth quarter of 2015.
Under the terms of the acquisition agreement, Technicolor will pay Cisco $450 million in cash and approximately $150 million in newly issued Technicolor shares.
The sales of Cisco's connected devices unit, which includes set top boxes, marks a stunning financial exit for Cisco after a decade of trying to build the business. In 2005, Cisco acquired set top box maker Scientific Atlanta for $6.9 billion. Cisco added another $5 billion of investment in July of 2012 with the acquisition of video software vendor NDS.
Though Cisco is not getting back the same amount it has invested in its connected devices business, Cisco executives argue that the business has added value to Cisco's bottom line over the years.
"Ten years ago, we entered the set top box business because of the role it played in our service provider customers’ business," Hilton Romanski, Senior Vice President and Chief Strategy Officer of Cisco, wrote in a blog post. "Connected devices have delivered $27 billion of aggregate revenue to Cisco since then."
Romanski added that Cisco's view is that the time is right, and Technicolor is the right partner, to take this business to the next stage of evolution and growth. As part of the acquisition, Romanski will now also join Technicolor's Board of Directors.
"At Cisco, we are prioritizing our investments to deliver on our strategy of video in the cloud, and will partner with Technicolor to position the CPE business and employees for future success," John Chambers, Chairman and CEO of Cisco, said in a statement.
The divestiture of the connected devices business unit is all part of a continuing re-alignment of Cisco to focus on it core areas of growth. Cisco has been exiting multiple businesses in recent years as it doubles down on its areas of core competence. In 2013, Cisco sold off its Linksys small business unit to Belkin. Like Scientific Atlanta, Cisco owned Linksys for 10 years before selling off the business.
Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist.