Cisco Systems Inc is buying digital video technology company NDS Group Ltd to enhance the range of products it sells to pay-TV providers and to expand in emerging markets.
The roughly US$4 billion deal would be Cisco’s first major acquisition since it paid US$3.4 billion for Norwegian teleconferencing company Tandberg in April 2010.
The networking gear producer has been working to turn its business around. It missed the early stages of the economic recovery and lost out to competitors when orders began to rebound.
Cisco said on Thursday that the NDS acquisition would speed up the delivery of its Videoscape entertainment platform and help it grow in emerging markets, such as China and India, where NDS already does business. Videoscape is a service that lets customers watch video on mobile gadgets and laptops along with their TVs.
Cisco is putting a US$5 billion price tag on the planned acquisition. That number includes debt.
NDS carried about US$1 billion in debt at the end of last year, the latest available figure from its regulatory filings.
ISI Group analyst Brian Marshall said the deal makes sense for Cisco because the San Jose, California-based firm focuses on video offerings for service providers. NDS, which competes with Cisco, counts pay-TV operators such as DirecTV, Vodafone, Cox and BSkyB among its customers.
NDS, based in the UK, is jointly owned by News Corp and private equity firm Permira. Its software helps cable and satellite TV companies deliver content to subscribers’ digital video recorders, tablets, smartphones and other devices. It had filed documents as part of a planned initial public offering before agreeing to the deal with Cisco.
Cisco is acquiring NDS’ sites in Britain, Israel, France, India and China and is absorbing its 5,000 employees. The boards of both companies have approved the deal, which is expected to close in the second half of this year.
Cisco’s stock fell US$0.28, or 1.4 percent, to close on Thursday at US$19.91 after trading as high as US$20.20 earlier in the session. That was near its 52-week high of US$20.49 reached about a month ago.
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