Cisco ‘walking away from low-margin STB business’
Cisco is pressing ahead with the reshaping of its Service Provider Video Business from a low-margin set-top box business to what Chairman and Chief Executive Officer John Chambers described as a “profitable and strategic Videoscape architecture in the cloud,” building on the company’s integration of NDS. Chambers made his comments during an analyst call discussing the company’s Second Quarter and Fiscal Year 2013 Financial Results.
Chambers reported that total SP Video revenue was up 20 per cent year-over-year. “The integration of NDS continues to go very well driving results on both the top and bottom line. The recent announcements of our next generation Videoscape platform integrating the assets acquired with NDS and market traction including major new alliances with AT&T and Cox have been very well received. We continue to drive a transition in our service provider video business driven by the integration of NDS evolving from low-margin set-top box business to more of a profitable and strategic Videoscape architecture in the cloud,” he advised.
He said that in driving the transition to more software video solutions, Cisco had been “more selective” in the business it was taking in terms of set-top boxes and the lowest margin set-top box business in particular, adding that NDS was helping driving its business in the cloud, moving from set-top boxes to more valuable and profitable software and service offerings.
Noting that in terms of service provider video, 20 per cent of the business growth was in NDS, Chambers advised that the Americas, then Asia Pacific, Japan, and China actually had good growth, whereas in Europe, “we are walking away from low volume, very poor margins set-top box business. So they were down dramatically. And I mean dramatically year-over-year in terms of the numbers.” He said there would be “a transition where it make sense, set-top boxes where we can make good margins, and the customers buying an architecture and if it’s purely a bid that is on very, very poor margins, we are not even going to bid and that’s what you are seeing in terms of results.”
He said he was “really comfortable” with where Cisco was in terms of its video strategy and service provider business. “We are focused on profitability as much as we are just roll of dollar growth. And I like the way this transition is playing out.”