Cisco sells SP video business to Technicolor for $600 million

Cisco has sold its SP video customer premises equipment (CPE) business to Technicolor for $600 million.

Technicolor and Cisco also signed a partnership agreement to develop and deliver next generation video and broadband solutions and services.

The Connected Devices business’ video and modem technologies will allow Technicolor to continue to deliver scale, and provide enhanced customer service.

Cisco will continue to refocus its investments in service provider video towards cloud and software-based services businesses.
In the last ten years, Connected devices business of Cisco have delivered $27 billion of aggregate revenue to Cisco.

The Connected Devices business will end fiscal 2015 with revenue of approximately $1.8 billion. Till the end of its fiscal Q2 FY 2016, the Connected Devices business will continue to operate as part of Cisco.

In May 2015, Cisco said — announcing the financial results for the third quarter of fiscal 2015 — it service provider orders globally decreased 7 percent and U.S. service provider orders declined 17 percent. Emerging market orders were flat, with the BRICs plus Mexico down 6 percent, while the remaining emerging markets grew 6 percent.

On the other hand, Cisco revenue from switching rose 6 percent, NGN routing grew 4 percent, wireless increased 9 percent, security growth was 14 percent, collaboration revenue up 7 percent and services revenue grew 3 percent.
Cisco photograph
The partnership agreement with Technicolor will also ensure Cisco remains close to this business and its service provider customers.

The acquisition should result in Technicolor’s Connected Home segment reaching adjusted EBITDA in excess of €200 million by year end 2016 and 8-9 percent adjusted EBITDA margin) by 2017.

Cisco will receive $450 million in cash and $150 million in newly issued Technicolor shares.

The transaction and addition of Cisco’s complementary product portfolio will make Technicolor one of the global leaders in CPE and will immediately increase the company’s industrial and technological scale in all major geographies:

# 15 percent market share worldwide
60 million devices shipped each year and a global presence with an installed base of 290 million set-top-boxes and 185 million gateways in over 100 countries
€3 billion of pro-forma revenues in 2014, doubling Technicolor’s revenues in the Connected Home segment
Synergies generation in excess of €100 million per annum on a run-rate basis
Strengthened innovation capabilities with over €250 million of combined annual spending in Research and Innovation.

As part of the agreement, Hilton Romanski, chief strategy officer of Cisco, will join Technicolor’s Board of Directors.

John Chambers, chairman and CEO of Cisco, said: “At Cisco, 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 employees for future success.”

Baburajan K
[email protected]