Cisco exits set-top box biz, sheds US$1.8bn of revenue

Technicolor flings €550 million to pick up Borg's Connected Devices Division

Cisco's Connected Devices Division, a purveyor of set top boxen for service providers, is off to Europe having been acquired for €550 million / US$600 million by Technicolor.

The French company, formerly Thomson (as most of its customer premises equipment/set-top boxes are branded), will take on the division first created by Cisco a decade ago.

Cisco's announcement says the Connected Devices Division's revenue for 2015 will be in the vicinity of $1.8 billion, making it relatively small fry in The Borg's greater scheme of world domination.

It's much more significant from Technicolor's point of view, since the French-based multinational's 2014 full-year revenue was around €3.3 billion ($3.6 billion), and the cash-and-stock acquisition would also give the buyer a greatly expanded service provider footprint.

The set-top boxes that are the backbone of Cisco Connected Devices give The Borg what's probably its biggest footprint among ordinary consumers, a market the company has exited whenever possible in recent years. Some of those exits, notably that for the Flip camera, were ugly..

However, the service provider business has been one of the company's disappointments in recent years, so the sale could be a parting gift from John Chambers to incoming CEO Chuck Robbins, by cleaning up that part of the balance sheet.

Hilton Romanski, Senior Vice President and Chief Strategy Officer of Cisco (who will join Technicolor’s Board of Directors) notes that passing the division to Technicolor will improve Cisco's non-GAAP margins by one per cent.

Technicolor expects the buy to give its Connected Home division “adjusted EBITDA in excess of €200 million by year end 2016 and best-in-class profitability (i.e. 8-9 per cent adjusted EBITDA margin) by 2017”.

Technicolor says the acquisition will give it a global market share in the vicinity of 15 per cent, shipments of 60 million devices annually, and will double its Connected Home segment revenues.

The two companies have also inked a partnership to develop “next generation video and broadband technologies,” with a focus on Internet of Things (of course) products and services. ®

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