Cisco’s Purchase of NDS Seen Expanding Videoscape Platform

The NDS acquisition which the companies agreed to Thursday will quicken the pace of developing the Videoscape platform by 2-3 years, enabling Cisco to more rapidly to create an end-to-end solution for cable operators, stretching from the headend to the set-top box, said Marthin De Beer, senior vice president of emerging technologies at Cisco. Cisco has gained Videoscape deployments with Rogers Communications and Telus in Canada and Numericable in France as operators moved to adopt IP to extend the reach of their services beyond the TV.

While Cisco has maintained its commitment to the set-top box business it acquired in buying Scientific-Atlanta six years ago, NDS will give it a range of software options from smartcards and Video Guard digital rights management to XTV DVR software, MediaHighway middleware and a Snowflake interface. Although Cisco slashed 6,900 jobs last year in selling its STB manufacturing plant in Juarez, Mexico, to Foxconn, STBs will remain central to deliver cloud-based services along a network, Cisco CEO John Chambers said during a news conference webcast from London. NDS is based in the U.K.

NDS also signals Cisco’s further tightening of its focus around a narrow core of businesses including video delivery, expected to account for 90 percent of the load on the Internet within a “couple years,” Chambers said. Cisco has sought to bolster Videoscape with the acquisitions of BNI Video and Inlet Technologies, the latter providing software that allows users to broadcast their video content and share it over multiple devices and networks.

For NDS, the sale, which includes about $1 billion in debt, cuts off a proposed $100 million IPO (CED Jan 4 p3) that the company filed for late last year. The IPO would have marked a return to the public markets by NDS, taken private in a $3.6 billion deal in 2008 that split ownership of the company between the financial firm Permira Advisers (51 percent) and News Corp. (49 percent). IPOs are frequently viewed as indicators that a company is in play and Cisco began exclusive talks with NDS on a possible acquisition about three weeks ago, analysts said. The sale is expected to be completed in this year’s second half.

In buying NDS, Cisco gets a company that swung to a $4.4 million profit in fiscal Q1 ended Sept. 30 from a $3.5 million loss a year earlier as revenue rose to $213.8 million from $210.3 million. It benefited from an increase in new MediaHighway middleware and DVR deployments to 11.3 million and 4.1 million households, vs. 10.1 million and 3 million a year earlier. Since 2008, NDS has spent $1 billion on research and development, increasing the number of R&D employees to 4,383 from 3,822. NDS had 475 patents issued and another 500 pending as of June 30, the company said. NDS’ VideoGuard smart card deployments stood at 109.7 million households as of September, while middleware deployments were at 54.2 million. DVR and electronic program guide software were in 15 million and 19.9 million households respectively, the company said. In addition to DirecTV, BSkyB and Sky Italia, NDS has software in equipment at Canal Plus, Kabel Deutschland, Sky Deutschland, Liberty Global’s UPC and Vodafone, NDS said. BSkyB, DirecTV and Sky Italia are NDS’ largest customers, accounting for 17 percent, 22 percent and 17 percent respectively of its $213.8 million revenue in fiscal Q1, the company said.