Cisco Cable Sales Get Hammered

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Cable’s hardware
duopoly may finally be
losing its grip.

Cisco Systems sales to
North American cable
operators fell 35% year-over-year in the quarter
ended Oct. 30, with the
networking giant blaming
the drop on lower
spending by MSOs on
set-top boxes, as well as
competition from lowercost
competitors.

Cable sales, by contrast,
were down significantly. Specifically, orders in Cisco’s
traditional set-top business — which represents
$2 billion in annual sales — fell 40% among North
American cable operators in the period. About half
of the company’s set-top business in the quarter was
from North American MSOs.

Cisco’s cable business “is under pressure as new
housing and consumer spending slows, as lower-cost
competitors begin to enter the market,” Cisco chairman
and CEO John Chambers told analysts.

The bad news for Cisco could be good news for
MSOs, Sanford Bernstein senior analyst Craig Moffett
wrote in a research note. “[W]e may (finally) be
seeing the beginning of the end of the [set-top box]
duopoly” of Cisco and Motorola, he said.

For its part, Motorola’s cable-focused Home division
posted sales of $912 million for the quarter
ended Oct. 2, 2010, up 5% versus $866 million in
the year-ago quarter —
but Home revenue was
down 9% in the first nine
months of 2010. With
MSOs in a transition to
IP set-tops, Cisco is facing
a lot of new competitors,
Chambers also said. It
will be two or three years
before Cisco knows “how
well we caught that transition
or not,” he said on
the call.

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