Cisco Pays Up for Pay TV


Staff member
Cisco Systems is doubling down on pay TV just as the sector's fortunes may be peaking.

The $5 billion enterprise value for pay-TV software maker NDS Group is Cisco's biggest acquisition since the deal for set-top box maker Scientific Atlanta, with a $5.3 billion enterprise value, in 2005. Cisco is getting software that should fit well with the existing products it sells to cable companies. And NDS sells mostly to satellite operators, which may provide an entree for Cisco to a new set of customers. NDS is partly owned by News Corp., NWSA -0.59%the parent of Dow Jones & Co., which publishes The Wall Street Journal.

But putting more eggs in the pay-TV basket isn't likely to drive much growth. That is because the next generation of TV watchers is increasingly cutting the cable cord, streaming video content over the Internet via services like Netflix NFLX -1.64%instead. Cord cutting isn't yet widespread, but it is likely responsible for recent stagnation in the number of households signing up for pay-TV service. NDS noted the risk presented by cord cutting in a recent regulatory filing. Its sales in the six months through December were up a relatively modest 7% year-on-year...
The sticker price for NDS doesn't factor in that Cisco is using overseas cash, which would otherwise incur a 35% tax hit to repatriate. Luckily for shareholders, Cisco isn't breaking the bank to stay tied to cable.
Read More: HEARD ON THE STREET: Cisco Pays Up for Pay TV -