Paris-based media and entertainment technology company Technicolor is buying computer networking giant Cisco Systems’ set-top box and related home broadband equipment business for roughly $600 million, Bloomberg reported today.
The deal will result in Technicolor becoming the No. 2 company worldwide in what is called “customer premises equipment” — phone gear, cable and satellite TV set-top boxes, routers and switches, and home monitoring/management devices — with total sales of roughly $3.3 billion and a 15% market share, vs the 25% share of the business that will be controlled by U.S. network gear maker Arris Group and British set-box maker Pace, when they complete a merger.
“Video is what is driving traffic today,” Technicolor CEO Frederic Rose told a conference call. “All this is fueling a massive demand for customer premises television equipment.” Technicolor said it would pay Cisco about $450 million in cash and about $150 million in new Technicolor shares, according to the Wall Street Journal. Deal is expected to close in the 4th quarter of 2015 or 1st quarter of 2016.
The acquisition will double the annual revenue at Technicolor’s connected-home unit, giving it a business that ships 60 million devices a year and has an installed base of about 290 million set-top boxes, Reuters said. Cisco will continue to partner with Technicolor in related areas but will focus more on the broader business of cloud and global networking.
The transaction will also boost Technicolor’s footprint in North America, where the combined company is expected to make 57% of its sales. Technicolor stock was up roughly 20%, pushing the company’s market value to about $2.66 billion.