Cisco Buying S-A for $6.9B

Cisco Systems Inc. is buying its way into the cable set-top business, agreeing to acquire Scientific-Atlanta Inc. for $6.9 billion in cash.

Much like Motorola Inc.’s purchase of General Instrument Corp. and its set-top division five years ago, the deal puts a major cable set-top vendor inside a multibillion-dollar company with larger broadband-product lines and significantly wider worldwide reach.

Cisco CEO John Chambers, during a conference call on the deal Friday, stressed the company’s ability to offer broadband providers worldwide an end-to-end video solution. “This will reduce the complexity of merging video, voice and data over IP [Internet-protocol] networks,” he said.

“Customers want integrated solutions,” said S-A chairman Jim McDonald, who agreed to stay on for two years after the deal closes.

S-A will join the router and technology group inside Cisco and sit alongside Cisco’s most recent cable-related acquisition, home-networking company Linksys. Cisco already generates about $1 billion in sales from cable for its router and cable-modem-termination-system business.

The $43-per-share price is only about 4% over where S-A’s stock closed Thursday, but it had run up in recent days on sale speculation.