“Cisco will control multimedia networking in years to come.”


The networking equipment giant Cisco makes so many acquisitions that few of its deals merit a mention anywhere but the technical networking press. In most cases, the target company concerned has some good technology, but little to show in terms of revenues.

The company's agreement to buy Scientific Atlanta, is, however, on a far greater scale. The deal should close in the early part of 2006. In terms of significance, it compares with Cisco's $4 billion 1996 acquisition of switch maker Stratacom, a deal that swiftly separated Cisco from the rest of the chasing pack and established its dominant position today.

Scientific Atlanta? Who? The company is little known in IT circles, but in broadband networking and digital broadcasting, it is a 50-year-old giant, supplying products to all the major operators. The New York Stock Exchange listed company has revenues of nearly $2 billion, and 6,500 employees around the world.

The deal is a clear demonstration of the rapid convergence that is sweeping through the global networking markets – whatever the application. Scientific Atlanta's specialities, industry and Cisco watchers should note, are video distribution, and digital/analogue integration (such as set top boxes). But that may be simplified: in its publicity, Scientific Atlanta says, "We operate in one segment: Broadband."

The $7 billion deal shows just how much importance Cisco now puts on multi-media, high-bandwidth technology – markets that are still maturing and growing. As broadcasters, telecoms and cable companies all step up their investments in providing IP based, high bandwidth services, Cisco will stand out, far above its rivals, in its range of products and, as Gartner likes to say, the "extent of its vision".



Mark Main, senior Analyst at Ovum thinks the deal could be good for all and will invigorate the broadband network equipment market.

"This acquisition makes a great deal of sense. Video is expected to be one of the strongest drivers in future service provider markets. The move sends a strong signal to telco-based equipment vendors like Alcatel that Cisco intends to compete hard. It also allows Cisco to compete more strongly against existing players.

This deal works on many levels, and it could turn out to be one of the defining moments for the whole IPTV industry. The supply side of the cable market has been in consolidation for some time, and this will accelerate it yet further."

Amir Bassan-Eskenazi, CEO of broadband multimedia infrastructure provider BigBand Networks, sees the two companies as awkward partners.

“Overall, we see this as a positive milestone for the market. It is a clear sign of the rising importance of broadband multimedia infrastructure.

“One of the interesting elements of this acquisition is the differences in each company’s approach. Cisco has consistently leveraged IP networking standards, while Scientific Atlanta has gained its market share through more proprietary, closed system practices such as its conditional access methodologies. Reconciling such ideological differences will be fascinating during integration efforts.”



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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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