Cisco finally bets big on video

Cisco's video ambitions until now have been anticlimactic in scope and market penetration.

But the company's $6.9 billion acquisition of Scientific-Atlanta changes all that. Not only is it Cisco's biggest video bet, but it gives the vendor instant leadership in a market on which it has had little previous impact.

Cisco has made a few small acquisitions over the past 10 years, including the purchase of Precept Software in 1998, which brought serial entrepreneur Judy Estrin to Cisco, but those moves have had little effect in the market or in Cisco's top and bottom lines.

The Yankee Group says the worldwide market for corporate video is just less than $1 billion this year, up about 33% from the $750 million in 2003.

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Cisco's video ambitions until now have been anticlimactic in scope and market penetration.

But the company's $6.9 billion acquisition of Scientific-Atlanta changes all that. Not only is it Cisco's biggest video bet, but it gives the vendor instant leadership in a market on which it has had little previous impact.

Cisco has made a few small acquisitions over the past 10 years, including the purchase of Precept Software in 1998, which brought serial entrepreneur Judy Estrin to Cisco, but those moves have had little effect in the market or in Cisco's top and bottom lines.

The Yankee Group says the worldwide market for corporate video is just less than $1 billion this year, up about 33% from the $750 million in 2003.

"If I were thinking of the top-five video vendors, I wouldn't put Cisco in there," says Zeus Kerravala of The Yankee Group. "They do sell some video infrastructure. It's pretty good stuff, but Cisco's been much more on the voice bandwagon for the past couple of years than video."

"They do OK, I wouldn't call it a large business for them by any stretch of the imagination," says IDC analyst Abner Germanow. "But video is an application that has a lot of potential."

Cisco's past enterprise-video initiatives were more for positioning itself for a potential market, as opposed to trying to attain a leadership position in a burgeoning market, says Gerry Kaufhold, a principal analyst at In-Stat.

"The timing was somewhat premature," he says. "Corporate video is just now becoming a popular item. Cisco knew all along, and correctly, that video would be part of the endgame, so they were positioning themselves to be in there."

The key to corporate video is video capture and edit, Kaufhold says. Cisco's early forays into video were aimed more at video distribution over Ethernet, he says.

But it wasn't until IPTV began to storm the consumer market two years ago that Cisco found itself pulled into a larger video role by default. Cable companies and telcos are relying on Ethernet to provision switched video into households and service specific edge routers to manage subscriber profiles and service characteristics. As the world's leading Ethernet switch and IP router vendor, the video game came to Cisco.