Pushing into the consumer digital media market, business-to-business networking giant Cisco Systems said that it agreed to buy cable set-top box manufacturer Scientific-Atlanta for $6.9 billion.


NEW YORK (The Hollywood Reporter) -- Pushing into the consumer digital media market, business-to-business networking giant Cisco Systems said that it agreed to buy cable set-top box manufacturer Scientific-Atlanta for $6.9 billion.

Scientific-Atlanta's clients include Time Warner Cable and Adelphia Communications.

Cisco plans to purchase Scientific-Atlanta at $43 per share.

In the past, Cisco's strategy was to acquire smaller businesses like the consumer hardware brand Linksys, whose products brought wireless networking to home and small business users. Cisco purchased Linksys for $500 million in 2003.

Dann Wilkens, VP at San Diego multimedia software company Packet Video, said the acquisition lands Cisco precisely where every media company is trying to be these days: in a world where four screens -- TVs, PCs, phones and movies -- collide.

"The home distribution of multimedia content is a huge focus for cable, computer, wireless and game companies along with the traditional content companies," Wilkens said. "They all want to figure out the magic means for people to access, store and reuse all this digital content. Whoever owns the biggest network stands to gain, and Cisco just bought a huge network."

The Scientific-Atlanta purchase also helps Cisco -- traditionally a business-to-business brand -- diversify its products to reach a wider consumer audience.

"Video is emerging as the key strategic application in the service provider triple-play bundle of consumer entertainment, communication and online services," Cisco president and CEO John Chambers said. "The combination of Cisco and Scientific-Atlanta brings unmatched experience and innovation in delivering large-scale video systems and networks."

Other tech companies have been grabbing for what they predict will be a slew of Internet TV dollars: Apple, Google and Yahoo! Inc. all launched video-search and broadcast products this year.

When analysts recently began speculation about the sale of Scientific-Atlanta, the Lawrenceville, Ga.-based company's stock price started climbing.

As of October, Scientific-Atlanta had shipped 3.8 million digital video recorders via cable operator partners. More recently, the company has won contracts to supply high-tech set-top boxes to the likes of SBC Communications, which along with other telecom firms is pushing into the video space, and Microsoft Corp., which is now launching Internet-based TV services.

Cisco said it expects the deal to close during its fiscal third quarter. It is in its fiscal second quarter.

Forrester Research analyst Josh Bernoff said in a report that Cisco's move will heat up the competition in Scientific-Atlanta's space: "Cisco takes no prisoners," he said. "Look for a full-on assault -- not just on U.S. telcos but on Motorola-based cable operators."