SAN FRANCISCO: Cisco Systems has labelled its acquisition of set-top box manufacturer, Scientific-Atlanta, as the fourth component in its quest to provide data, voice, mobility and video convergence.
The networking vendor agreed to buy Scientific-Atlanta, in a deal valued at $US6.9 billion, earlier this month.
"Video is emerging as a key element in the service provider's quad play," Cisco's president and CEO, John Chambers, said. "In fact, video may be the most critical in this bundle for consumer loyalty."
Cisco already has products that let service providers deliver data, voice and mobility. Scientific-Atlanta, a maker of cable set-top boxes, adds the video component.
By integrating Scientific-Atlanta's set-top boxes with router products from Linksys group, Cisco could make a unique converged offering to the market, Chambers said.
"The opportunity for Cisco is to reduce complexity for users," he said. "An integrated architecture is in our opinion the only way to reduce complexity."
Industry observers agree. A single device includes cable TV capabilities, a cable modem, wireless LAN, VoIP and potentially even high-definition TV, would be valuable, a research manager at IDC, Peter Hulleman, said. Cisco already has many of these technologies.
For example, a single device might make it easier for users to download movies from the Internet and watch them on their televisions, Hulleman said.
With the backing of Cisco, Scientific-Atlanta was in a better position to pursue opportunities in a changing marketplace, chairman, president and CEO, Jim McDonald, said.
Cable companies were moving toward a new architecture that allowed them to deliver video and voice services over converged networks, he said. At the same time, telephone companies were making offerings in the entertainment market. Both markets wanted integrated solutions from fewer vendors.
"This dynamic environment has tremendous potential for us but we need more resources to capture the opportunity in these expanding markets," McDonald said.
The Cisco acquisition would enable that, he said.
Cisco expects the acquisition to close in the third quarter of its 2006 fiscal year.
The deal has been approved by the boards of both companies.
Scientific-Atlanta will become a division within Cisco's routing and service provider group but will operate as a separate business.