Dissecting the Cisco/Scientific Atlanta deal
NetworkWorld.com, 11/21/05
With the purchase of Scientific Atlanta, Cisco now owns 40% of the market for set-top boxes that bring cable TV into homes via IP streams.
Scientific Atlanta also makes digital video recorders, cable modems, cable set-top boxes and IP TV networking gear for service providers.
Cisco's Linksys division makes all sorts of home IP gear including game adapters, broadband routers that support VoIP, cable modems, a wireless Skype phone, VoIP phone adapters and an internet video camera.
The Scientific Atlanta purchase represents the addition of equipment needed to provide home broadband Internet access, cable TV and VoIP services over fiber/coaxial cable networks. It also augments Cisco's home networking gear.
This means Cisco, if it successfully integrates Scientific Atlanta, will offer a just about everything cable service providers need to reach the last mile to customers. Cisco's high-end switching and routing gear can already transport all this traffic across wide area networks.
Some Scientific Atlanta customers are Adelphia, Cablevision, Charter Communications, Comcast, Cox, and Time Warner Cable - a who's who of cable multiple service operators (MSO).
This deal means Cisco is going to be a bigger part of everybody's life at home, which is not necessarily a bad thing. As consumers buy more broadband services, the will require more home networking gear, and the average home use wll need a little help getting that done. If one vendor can supply easy-to-use gear through the cable MSO, so much the better.
Cisco make acquisitions because it thinks it can make money off them, and in this case that potential seems to come more from the customer list Scientific Atlanta brings rather from the technology. Cisco's confidence in the deal, which can be gauged from the $6.9 billion price, is also a shot in the arm for VoIP. The value of having cable MSO customers now hinges on the belief that they will be buying IP equipment to support new video, voice and data services. Cisco has that belief and is willing to pay for it.
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