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November 4, 2009

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Cisco buys set-top box maker

CISCO Systems Inc announced yesterday it will spend US$44.5 million to acquire Hong Kong-listed set-top box maker DVN (Holdings) Ltd, which has major operations on the Chinese mainland.

It's Cisco's first acquisition aimed at the Chinese market, which shows the American communications technology maker's expansion in the fast-growing consumer market, analysts said.

Under the agreement, Cisco will pay about US$17.5 million upfront, with an additional maximum amount of US$27 million to be paid over four years, based on specific sales figures, said Cisco, without revealing the figures.

"Both sides will offer customers the powerful combination of DVN's products with the Cisco's IP Next-Generation Network (IP NGN) platform," Ken Klaer, vice president and general manager of Cisco's International Cable Business Unit, said. "Cisco will be well positioned to engage in the largest digital transformation opportunity in the world today."

Cisco said it also plans to enter into an alliance with DVN to utilize its software, applications and support services.

The Chinese cable television market is the largest in the world with 160 million subscribers and is predicted to grow to 200 million in the next few years.

Currently, only about one-third of the market has converted to digital cable but the analog network will be shut down in 2015, which represents a huge opportunity for Cisco, analysts said.

In Shanghai, about 2.5 million downtown households will use digital TVs by 2011, triple the current number. Each digital TV system includes a set-top box.

Cisco's acquisition, which is scheduled for the first half of next year, needs approval from DVN shareholders and regulators.



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