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July 23, 2015

Cisco offloads set-top unit for £386m

Deal with Technicolor reverses decade old John Chambers' purchase.

By Jimmy Nicholls

Cisco is jettisoning its set-top box business for £386m in a sale that will reverse one of chief executive John Chambers’ biggest deals for the firm as he prepares to leave in a matter of days.

The company’s Connected Home unit will be bought by French media group Technicolor in cash and stock, mostly reversing Cisco’s $6.9bn (£4.4bn) purchase of Scientific Atlanta some nine years ago.

"The strategic relevance of video to every consumer, business, city and country around the world is only growing, and the market is moving rapidly," Chambers said.

"This is the right time and we have the right company in Technicolor to drive the future of the CPE business to deliver what our customers and partners need, today and into the future."

As part of the deal both firms will enter into a partnership focused on video and broadband development, with Cisco taking around £96m worth of newly issued Technicolor shares.

Cisco CTO Hilton Romanski will also join the board of directors at Technicolor once the sale has closed.

"Ten years ago we entered the set top box business because of the role it played in our service provider customers’ business," Romanski explained in a company blog post.

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"Connected devices have delivered $27bn of aggregate revenue to Cisco since then. This technology continues to be critical for these customers."

Despite Cisco’s defence of the set-top business, revenues from its sales of video products fell by almost a fifth year-on-year for 2014, totalling some £2.6bn.

For Technicolor the deal will increase its footprint in the customer premises equipment (CPE) market, granting it around 15% market share worldwide and doubling its revenues to £2.1bn in the connected home segment.

The media firm will also have an installed base of some 290 million set-top boxes and 185 million gateways in more than 100 countries.

"We know that video expertise is essential to the future of creating outstanding network and home infrastructure products and services," said Frederic Rose, chief executive of Technicolor.

"Through this acquisition and strategic agreement, Technicolor can immediately bring its unrivalled experience and innovation in video creation, delivery, and display to more customers in more geographies, while strengthening our position as a technology leader."

Earlier this week CBR outlined the biggest competitors vying to rule the Internet of Things and connected device markets. The full list can be read here.

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