SAN FRANCISCO--Cisco Systems announced Thursday (March 15) that it would be buying set-top box software maker the NDS Group for $5 billion in cash.
NDS, founded in Israel in 1988 and now headquartered in London, focuses on seamless content streaming between different devices, as well as content protection security to combat piracy.
The firm already boasts media giants like British Sky Broadcasting and DirecTV as clients, as well as Sky Italia, and analysts believe the acquisition will boost Cisco’s Videoscape streaming platform and boost software revenue for the firm as its core networks business decreases.
This is not the first time NDS has been acquired, having been snapped up in 2009 by private equity firm Permira and Rupert Murdoch’s media giant News Corp. for $3.6 billion. Today, NDS counts 5,000 employees and has offices in five countries, including extensive operations in Israel.
With NDS software, users get what the firm describes as a “unified entertainment experience across several devices,” meaning that one can flit between watching the same program on one’s TV, tablet or smartphone, with the software adapting the programming to the various formats automatically. The software architecture itself goes by the name of Snowflake.
Cisco CEO John T. Chambers said the acquisition was prompted by his firm’s strategy to hone in on customer needs and capturing market transitions.
“Our acquisition of NDS fits squarely into this strategy, enabling content and service providers to deliver new video solutions that leverage the cloud and drive new monetization opportunities and service differentiation,” he said.
Indeed, adding a more lucrative software and services model to Cisco’s existing low-margin set-top box business would do much to increase profitability, analysts speculated.
The services themselves could also be white labeled and sold to global cable companies looking to offer value to consumers owning a range of digital devices.
Cisco’s $5 billion includes the assumption of about $1 billion of NDS debt and is the biggest purchase the networking firm has made since it acquired video conferencing company Tandberg for $3 billion in 2009.
The deal is likely to close by the end of 2012, after regulatory review, and NDS’s CEO Abe Peled will apparently transition to become a senior vice president and chief strategist for Cisco’s video and collaboration group.
This is a very interesting acquisition for Cisco. It is difficult to tell whether this is an expansion of their current market strategy, or simply a new tool to use to maintain current market share and possibly achieve greater market share. If properly merged, this could be a plus for them.
NDS has a long history. See the story here: http://msn.fool.com/EETimes/1997/EETimes970613d.htm
This is what I wrote back in 1997 when I visited NDS in Heathrow:
In the field of digital-video technology alone, News Corp. recently  consolidated three companies under the name NDS: a company formerly known as News Digital Systems, Digi-Media Vision and News Datacom. Digi-Media, before being acquired by News Corp., was the advanced-product division of the U.K.'s National Transcommunication Ltd.
One of the things about NDS that always impressed the industry about its conditional-access expertise. Without a good encryption technology, streaming video -- whether done through satellite, cable or "cloud" -- has always been an iffy proposition to content providers.
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