Cisco Grabs Video Rebound

Cable Sales Up Against Backdrop of Google-Motorola Deal

By Todd Spangler -- Multichannel News, 2/13/2012 12:01:00 AM

Cisco Systems has recharged its cable-focused video-technology unit — and it may have Google partly to thank for the turnaround.

For the quarter ended Jan. 28, Cisco’s Service Provider Video Technology Group sales jumped 23% to reach $1 billion for the period, a year after the company posted a steep drop in set-top sales. The video unit started to recover last fall, with a 13% yearover- year sales increase in the October 2011 quarter.

The company is seeing “pervasive video growth” occurring in the market, Cisco chairman and CEO John Chambers said on the company’s earnings call. He noted that Cisco’s emerging video technology sales grew 59% in the quarter.

The turnaround comes after Cisco’s cable set-top sales plunged 29% year over year for the three months ended Jan. 29, 2011. In the year-ago quarter, the set-top business fell to an annualized run rate of approximately $1.6 billion — down from about $2 billion three months earlier — according to the company.

Cisco remains “very much committed” to the set-top box market, Chambers said on the call last week, a point he has made the last two quarters as the company sold off its set-top manufacturing facility to Foxconn Technology Group. “Our service-provider customers asked us to partner with them as they move from the traditional set-top boxes to IP settop boxes to the cloud in our Videoscape solution,” he said.

The CEO’s set-top affirmations also appear aimed at customers of key rival Motorola Mobility, which is in the process of a $12.5 billion takeover by Google. The U.S. Justice Department is expected to approve the deal as early as this week, The Wall Street Journal reported, citing unnamed sources.

In November, Chambers told analysts Cisco “got very lucky that Motorola got purchased by Google,” because it made operators nervous about the Internet giant’s post-acquisition plans. Google mainly wants Motorola’s trove of 17,000-plus patents, to protect its Android mobile operating system from litigation by competitors like Apple and Microsoft.

The strength in Cisco’s Service Provider segment, which accounts for approximately 33% of overall sales, left Jefferies & Co. analyst George Notter “positively surprised.”

“The Service Provider numbers ran contrary to recent company commentary across the space,” he wrote in a research note, adding that “a good chunk of the carrier strength” came from Cisco’s Service Provider Video Technology Group.

Last fall, Cisco named Jesper Andersen as senior vice president and general manager of the group. He replaced Enrique Rodriguez, a former Microsoft exec who left Cisco after about a year.

CABLE CLOUT

Highlights from Cisco’s quarter ended Jan. 28:

Service Provider Video Technology Group sales up 23% year over year, to $1 billion

Total service provider segment product orders up 12%

Overall sales of $11.5 billion (up 11%)

Net income of $2.2 billion (up 44%)

Completed $99 million acquisition of video-on-demand startup BNI Video

SOURCE: Cisco Systems