Technicolor has entered into an exclusive agreement with Cisco to acquire its customer premises equipment (CPE) business for €550 million in a cash and stock transaction.
The acquisition includes all of Cisco’s cable modem and set-top box businesses. The move underlines further consolidation in the STB business following the recent acquistiion of Pace by Arris.
Cisco already considered a sale of the set-top box division it purchased from Scientific-Atlanta in 2012 as the company became disenchanted with the market which has changed dramatically since the $7 billion purchase.
In the same year, Technicolor CEO Frederic Rose also said that he was in talks with a number of companies to take a stake in its loss-making set-top box business.
Technicolor and Cisco will also enter into a strategic partnership that will allow both companies to develop and deliver next generation video and broadband technologies, with cooperation on Internet of Things (IoT) solutions and services.
Technicolor and Cisco also have signed a long-term patent cross-licensing agreement that covers specific intellectual property and patents from both companies. As part of the strategic agreement and after the transaction has closed, Hilton Romanski, SVP and Chief Strategy Officer of Cisco, will join Technicolor’s Board of Directors.
“We know that video expertise is essential to the future of creating outstanding network and home infrastructure products and services,” said Frederic Rose, CEO 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.”
“The strategic relevance of video to every consumer, business, city and country around the world is only growing, and the market is moving rapidly,” said John Chambers, chairman and CEO of Cisco.
“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. At Cisco, we are prioritizing our investments to deliver on our strategy of video in the cloud, and will partner with Technicolor to position the CPE business and employees for future success.”
In a company blog, Cisco ‘s Hilton Romanski wrote: “Ten years ago we entered the set-top box business because of the role it played in our service provider customers’ business. Connected devices have delivered $27 billion of aggregate revenue to Cisco since then. This technology continues to be critical for these customers. We are proud of the contribution this business and its people have made to Cisco over many years. This includes providing new innovations, expanding important markets, and deepening our service provider relationships. We now believe that the time is right, and Technicolor is the right partner, to take this business to the next stage of evolution and growth.”
The acquisition should result in Technicolor’s Connected Home segment reaching adjusted EBITDA in excess of €200 million by year-end 2016 and best-in-class profitability (i.e.8-9% adjusted EBITDA margin) by 2017.
Cisco will receive approximately €413 million ($450 million) in cash and approximately €137 million ($150 million) in newly issued Technicolor shares.
The transaction is expected to close by the end of the fourth quarter of 2015 or during the first quarter of 2016, subject to regulatory approvals and customary closing conditions.
Broadband TV Views. Consolidation in the STB segment of the business is moving fast. No wonder, as these ‘old school’ devices are set to make room for cloud-based and software driven services.
Arris acquired its competitors Motorola and Pace, but also laid its hands on ActiveVideo Networks, a company that is ahead in the business of cloud delivered interactive services and STB virtualisation.
LIkewise, Irdeto has now partnered with CAM munifactirer SMiT and Samsung to deliver direct-to-TV services to Indonesia’s Transvision pay TV platform, pointing the way to a STB-less future.
In 2012, Samsung also pioneered with Estonia’s Telia with a direct-to-TV service.
SMiT is also working to launch an IPTV version of its CAM using the CI Plus 1.4 standard.
At the same time, TV Everywhere is developing fast with streaming channels and on-demand content becoming available on a variety of devices, including tablets and smart phones. Meanwhile, these mobile devices are now also talking to smart TV sets making a move away from traditional STBs inevitable.
