Buying Scientific-Atlanta will give Cisco the fourth component of what the company is calling a “quad play” — data, video, mobility and voice convergence.
“Video is emerging as a key element in the service provider’s quad play,” says John Chambers, Cisco’s president and chief executive officer. “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, and Scientific-Atlanta adds the video component.
By integrating Scientific-Atlanta’s set-top boxes with router products from Cisco’s Linksys group, Cisco can take a unique converged offering to the market, Chambers says. “The opportunity for Cisco is to reduce complexity for users ... An integrated architecture is, in our opinion, the only way to reduce complexity.”Industry observers agree. A single device that includes cable TV capabilities, a cable modem, wireless LAN, VoIP and, potentially, even high-definition TV would be valuable, says Peter Hulleman, a research manager at analyst firm IDC.
For example, a single device might make it easier for users to download movies from the internet and watch them on TV, Hulleman says.
With the backing of Cisco, Scientific-Atlanta is in a better position to pursue opportunities in a changing marketplace, says Scientific-Atlanta head Jim McDonald. He says cable companies are moving towards a new architecture that allows them to deliver video and voice services over converged networks. At the same time, telephone companies are making offerings in the entertainment market. Both markets want integrated solutions from fewer vendors, he says.
“This dynamic environment has tremendous potential for us but we need more resources to capture the opportunity in these expanding markets,” McDonald says. The Cisco acquisition will enable that, he says.
Cisco will pay US$43 in cash per Scientific-Atlanta share and Scientific-Atlanta will become a division within Cisco’s routing and service provider group. It will operate as a separate business.