By Don Clark
SAN FRANCISCO--Technicolor SA has agreed to buy Cisco Systems
Inc.'s TV set-top business for about $600 million, one of the first
signs of its incoming chief executive's priorities.
The deal with the French company closes Cisco's 10-year
involvement in a business that sprung from one of its most costly
acquisitions. The Silicon Valley giant in 2005 announced a $6.9
billion deal to buy Scientific-Atlanta Inc., which sold products
used in homes as well as equipment for cable providers' central
offices.
Cisco, while shedding the business that sells products like
set-top boxes and cable modems, said it planned to continue selling
products to carriers and would collaborate with Technicolor to
develop video and broadband technologies.
Chuck Robbins, who assumes the CEO position at Cisco from John
Chambers on Monday, described the sale as the first in a series of
moves to concentrate on business with the biggest potential
payoff.
"We will continue to make decisions to prioritize our portfolio
and our investments to accelerate our business," Mr. Robbins wrote
in a blog post.
He also disclosed internal changes that included moving
functions associated with two business trends--the Internet of
Things and cloud services--into broader engineering, sales and
services units. Mr. Robbins wrote that, while Cisco's overall head
count was up, a small number of employees might lose their jobs as
part of other recent reorganization efforts.
Cisco has struggled in the video sector lately, losing sales to
rivals such as Arris Group Inc. and Casa Systems Inc. Revenue from
its service-provider video segment declined 5% in its fiscal third
quarter following a 19% decline in the prior period.
The company noted that carriers were focusing more on software
and video offerings that rely on what the industry calls cloud
services, a market where Cisco would continue to direct future
investments.
Mr. Robbins said the sale of the consumer business "is a win for
us, a win for Technicolor, and a win for our customers, partners
and employees."
Cisco has exited other consumer businesses, selling its Linksys
home router unit to Belkin International Inc. in 2013 and closing
its Flip video-camera business two years earlier. Cisco's consumer
unit generated about $1.8 billion in revenue in its fiscal year
ended in June.
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.
The Paris-based company said the cash-and-stock transaction
would boost its position in home-video and communications
products.
Hilton Romanski, Cisco's senior vice president and chief
strategy officer, is expected to join Technicolor's board of
directors after the transaction closes. The companies said they
expected 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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