Cisco shores up video after acquisition

With the purchase of NDS Group, Cisco is now making bigger bets on its priorities, including video.

With the purchase of NDS Group, Cisco is now making bigger bets on its priorities, including video.

Cisco has announced its intent to acquire NDS Group for about US$5 billion, which provides video entertainment software and services for service providers and media companies.

Cisco sees value in NDS foremost as a vehicle to deliver its Videoscape entertainment platform. But the company's partnerships with service providers and its presence in major emerging markets — China and India, for example — are also of great interest.

On the company's most recent fourth quarter earnings call, chief executive John Chambers underscored the importance of video for the company's future prospects:

We will stay very focused on five company priorities, which we will believe will be the key in both the growth and the future of the internet but also our differentiation, as well as our advantages we think we can achieve in terms of margins versus our peers in the industry. As a reminder, these five priorities are the following: leadership in core, which includes routing, switching and services; comprehensive security and mobility solutions. Number two, collaboration; number three, datacentre going to virtualisation going to cloud; number four, video; number five, architectures for business transformation. These five company priorities are the key drivers of the future of the network and are core to the internet. They are, in our opinion, not only the most important but also the most difficult elements in intelligent networking, but at the same time, the hardest to provide an integrated solution from a leadership point of view.

Scalable video, of course, requires strong network performance; that's where the rest of Cisco's businesses come in. Sales of business video and other "tech architecture" products around collaboration and the datacentre have a strong "pull-through" rate that leads to sales of the company's traditional routing and switching products, which are needed to support them.

And it certainly helps that the company is seeing growth in the segment: US$4.9 billion in 2011 revenue and 29 per cent year-over-year growth (which, of course, includes Cisco's US$3 billion Tandberg acquisition in 2010).

The emerging markets angle in this acquisition also shouldn't be ignored; those countries represent about one-fifth of Cisco's product business today and are forecast to fuel 40 per cent of the company's product growth over the next five years (with the strongest growth being in: Russia, followed by Brazil, China, Mexico and India).

With the NDS acquisition, Cisco is making increasingly bigger bets on its biggest priorities. We'll see how it shakes out as global economies — and corporate budgets — stabilise.

Via ZDNet