Cisco buys video tech company for $4.8bn

Cisco is buying digital video technology company NDS Group, that's based within the Uk, for roughly US$4 billion (NZX$4.88bn) to augment its video offerings to pay-TV providers and expand in emerging markets.

The acquisition could be Cisco's biggest for the reason that company bought Norwegian teleconferencing company Tandberg in April 2010 for $3.4 billion.

Meanwhile, the networking gear maker have been engaged on turning its business around. It missed the early stages of the industrial recovery and lost out to competitors on rebounding orders.

Cisco said that purchasing NDS will accelerate the delivery of its Videoscape entertainment platform and help it grow in emerging markets similar to China and India, where NDS already does business. Videoscape lets customers watch video on mobile gadgets and laptops at the side of their TVs.

Cisco is putting a $5 billion price ticket at the planned acquisition, but that's with debt. NDS owed about $1 billion in debt on the end of 2011, the most recent available figure from its regulatory filings.

San Jose, California-based Cisco was narrowing its focus by culling divisions and cutting costs through layoffs. It shuttered its consumer-oriented Flip video camera business last year but video offerings for businesses have remained a huge portion of its focus.

It acquired Scientific-Atlanta, a maker of TV set-top boxes, in 2006 for $7.1 billion and online conference provider WebEx a year later for $3 billion.

Brian Marshall, an analyst with ISI Group, said the deal is smart for Cisco because it specializes in video offerings for service providers. NDS, which competes with Cisco, counts pay-TV operators equivalent to DirecTV, Vodafone, Cox and BSkyB among its customers.

NDS is jointly owned by News Corp. and personal equity firm Permira. Its software helps cable and satellite TV companies deliver content to subscribers' digital video recorders, tablets, smart phones and other devices. It had filed documents as portion of a planned initial public offering before agreeing to the contend with Cisco.

Cisco is acquiring NDS' sites in Britain, Israel, France, India and China and is absorbing its 5,000 employees. The boards of both companies have approved the deal, and it's expected to shut within the second 1/2 this year.

Marshall said that while the purchase is a "good use of offshore cash" for Cisco, the corporate is paying an awful lot. He estimates that Cisco is paying about 25 times NDS's earnings, while Cisco's stock trades at about 10 times its earnings.

BGC Financial analyst Colin Gillis said video is a huge priority for Cisco. While the corporate isn't moving clear of networking gear, growth in that area has stalled out to a point and is now within the single-digits, he said.

So, the corporate must find the following high-growth area, and that is video, he added.

- AP