Cisco sells set-top box business to Technicolor for $600 million
Cisco is lightening up its load and selling off its customer-premises equipment business to Paris-based Technicolor for $600 million, the companies disclosed early Thursday morning.
Once the deal closes, which is expected to be by either the end of the fourth quarter of 2015 or during the first quarter of 2016, Cisco (CSCO) senior vice president and chief technology and strategy officer, Hilton Romanski will join Technicolor’s board of directors. The two companies “also signed a strategic partnership agreement to develop and deliver next generation video and broadband solutions and services,” wrote Romanski in a blog post on the announcement.
The news shouldn’t come as too much of a surprise for Cisco observers. Cisco inherited the set-top box business when it acquired telecom and television manufacturer Scientific-Atlanta for $6.9 billion. A set-top box is basically a type of device that can take cable, satellite or other digital signals and convert them to video that you can watch on your television.
But since that acquisition, Cisco has been having a hard time getting a decent return out of the business as sales have been steadily declining. Investors have been urging Cisco to rid itself of the business, with some saying that it wasn’t essential to the company’s core business.
“With this move, 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 its employees for future success,” CEO designate Chuck Robbins wrote in a blog post about the deal.
Romanski explained that when Cisco’s fiscal 2015 ends, the set-top box business will have revenue of $1.8 billion. In 2013, CEO John Chambers said that the same business had an annual revenue of $2.6 billion, which tells you how much the business has been slumping.
“On close, we expect to see a positive impact to Non-GAAP gross margins of approximately 1 point with negligible impact to the bottom line as we continue to invest in our video business,” Romanski wrote.
A Cisco spokesperson wrote to Fortune to say that “Cisco will continue our commitment and focus on our service provider video infrastructure, cloud and software business.”
Apparently, Cisco will still be making video gear, just not the type that’s made for households.
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