By Don Clark
SAN FRANCISCO--Paris-based Technicolor SA has agreed to buy
Cisco Systems Inc.'s TV set-top business for about $600 million,
ending the Silicon Valley company's involvement with a business
that began as one of its most costly acquisitions.
Technicolor said the cash-and-stock transaction would boost its
position in home-video and communications products. Cisco said the
unit being sold generated about $1.8 billion in revenue in the
fiscal year ended in June selling communications devices called
gateways as well as set-top boxes.
Cisco entered the market through its $6.9 billion acquisition in
2006 of Scientific-Atlanta Inc., a deal that included products used
in homes as well as equipment for cable providers' central offices.
The company said it planned to continue selling products to
carriers and would collaborate with Technicolor to develop video
and broadband technologies.
The U.S. network equipment maker has struggled in the sector
lately, losing sales to rivals such as Arris Group Inc. and Casa
Systems Inc. Cisco in May said revenue for its service-provider
video segment declined 5% in its third fiscal quarter following a
19% decline in the prior period.
Hilton Romanski, Cisco's senior vice president and chief
strategy officer, said in a blog post that its connected devices
unit had generated $27 billion in cumulative revenue since the
acquisition. But carriers are focusing more on software and video
offerings that rely on what the industry calls cloud services, a
market where Cisco will continue to direct future investments, he
said.
He said the unit being sold would fare better under an owner
that was committed to the consumer-products sector. "We now believe
that the time is right, and that Technicolor is the right partner,
to take this business to the next stage of evolution and growth,"
he wrote.
Cisco has exited other consumer businesses, selling its Linksys
home router unit to Belkin International Inc. in 2013 and closing
its Flip videocamera business two years earlier.
Technicolor, known as Thomson before it assumed the name of its
U.S. media division in 2010, said it would pay Cisco about $450
million in cash and about $150 million in newly issued Technicolor
shares. Mr. Romanski is expected join the company's board of
directors after the transaction has closed. The companies said they
expect the deal to close in the fourth quarter of 2015 or the first
quarter of 2016.
Write to Don Clark at don.clark@wsj.com
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