​Cisco sheds its set-top box business to Technicolor for $600m

After 10 years selling set-top boxes, Cisco has exited the market to double down on video in the cloud.

Cisco has sold its set-top box division to French firm Technicolor for $600m, as well as striking a patent cross licensing deal and partnership for Internet of Things services.

The companies announced the $600m cash and stock deal today, which will see Cisco's service-provider video customer premises equipment business move to Technicolor, boosting the French firm's installed base to 290 million set-top boxes and 185 million gateways.

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Hilton Romanski, Cisco senior vice president and chief technology and strategy officer, will join Technicolor's board once the deal is closed, expected to be in the fourth quarter of 2015. Under the agreement, Cisco will receive €413m ($450m) in cash and approximately €137m ($150m) in newly-issued Technicolor shares.

The two companies have also entered a partnership to jointly build and sell next-generation video and broadband technologies and cooperate on Internet of Things devices and services. Additionally, the pair have signed a long-term patent cross-licensing agreement though neither company has said which patents are involved.

Incoming Cisco CEO Chuck Robins said that after 10 years in the consumer premises equipment (CPE) business it was time to hand the reins to Technicolor and double down on video in the cloud.

"With this move, 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 its employees for future success. This is a win for us, a win for Technicolor, and a win for our customers, partners and employees," said Robins.

Cisco gained its set-box business through its acquisition of Scientific-Atlantic for $6.9bn in 2006 amid its push to develop a new consumer electronics division.

Robins, who takes over from Cisco chairman and chief John Chambers next week, said Cisco plans to accelerate efforts in the 'Internet of Everything' (IOE) and cloud, and move engineering, services and sales across the two units from incubator to primary functions.

"We have incubated both of these businesses as standalone organizations, but we now have the opportunity to integrate them within our primary functions. To that end, we are moving IoE and Cloud engineering into our Engineering organization, IoE and Cloud services pieces into our services business, and IoE and Cloud sales into our worldwide sales team. These changes will allow us to scale these businesses as we see increased customer engagements globally," said Robins.

Cisco's Romanski said the connected devices business will end fiscal 2015 with revenue of around $1.8bn.

"On close, we expect to see a positive impact to non-GAAP gross margins of approximately 1 point with negligible impact to the bottom line as we continue to invest in our video business," he said.

The sale of the set-top box business follows Cisco's June acquisition of security firm OpenDNS for $635m in a move bolsters its cloud delivered security portfolio.

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