Cisco Grabs Video Rebound

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