Following advanced-television.com’s reporting that a deal was imminent, Permira, the global private equity firm, has confirmed that it is to acquire Cisco’s Service Provider Video Software Solutions (SPVSS) business. Following the close of the transaction, the Permira Funds will create a new, rebranded company focused on developing and delivering video solutions for the pay-TV industry.
The new company will encompass a broad portfolio, including Cisco’s Infinite Video Platform, cloud digital video recording, video processing, video security, video middleware, and services groups. Highly-regarded video industry leader Dr. Abe Peled, former Chairman and CEO of NDS and adviser to the Permira Funds, will serve as Chairman of the new company. The sale of the Cisco SPVSS business has been approved by Cisco’s Board of Directors.
“This is a unique opportunity to lead and shape the video industry during its transition with the flexibility as a private company,” said Peled. “The new company will have the scale, technology innovation, and world-class team to deliver outstanding go-to-market execution, customer engagement, and new end-user experiences. Cisco has built a profitable business in the video space with innovations to capitalise on IP distribution and cloud-based services. These combined assets provide a significant new opportunity for the new company. I am thrilled to be working again in this area with Permira who is committed to innovation and support for our pay-TV customers, and look forward to the ongoing working relationship with Cisco in support of our mutual customers.”
“We are proud of our innovation in video and the customer momentum that the Service Provider Video group has built,” said Chuck Robbins, Chairman and CEO, Cisco. “With the leadership team and Abe as Chairman, the new company is well-positioned to drive this work forward and continue to deliver the solutions that meet the current and future needs of service provider video customers. Service providers remain a key customer segment for Cisco, and we look forward to continuing to partner with them to deliver new revenue-generating services and experiences.”
Cisco will retain the video and media technology related to its core business in networking, multi-cloud, security, data, and collaboration. The transaction is expected to close in Cisco’s Q1 FY19, subject to any regulatory approvals and customary closing conditions.
Terms of the deal were not revealed, with reports prior to the acquisition suggesting the sale price could to be up to $1 billion (€820 million), representing a considerable loss to Cisco, which acquired video software and middleware company NDS, at the time managed by Peled, for some $5 billion in March 2012, with the aim of complementing and accelerating the delivery of its Videoscape platform, completing the deal in August 2012.
NDS was established in 1988 as an Israeli start-up company, and was acquired by News Corporation in 1992. In 2009, Permira and News Corporation announced a $3.6 billion arrangement for buying the public holding in NDS, turning it into a privately held company. Permira held 51 per cent, and News Corporation approximately 49 per cent.
In a Blog post, Yvette Kanouff, Senior Vice President and General Manager of Cisco Service Providers at Cisco, said she felt “very positive” about the deal for many reasons. “It is great for our customers, our employees, and for Cisco,” she suggested.
“Cisco’s strategy is focusing on our five key areas of networking, multi-cloud, security, data, and collaboration. Given this strategic direction, it is the right time for the SP video group to be a stand-alone company. I believe it will be very successful, and it will be focused solely on growth in this marketplace,” she noted.
According to Kanouff, another positive factor is that Dr. Abe Peled has agreed to become the chairman of the new company. “As you may remember, Abe was formerly the CEO of NDS. He knows our customers well, he knows the segment well, and he will be a great steward to the board and to the business,” she asserted.
“Permira will acquire a market-leading portfolio that spans the video delivery value chain with solutions including Infinite Video Platform, cloud DVR, video processing, video security, video middleware, and services. Cisco will retain the video and media technology related to our core business in networking, multi-cloud, security, data, and collaboration,” she explained.
“I’m very pleased to say that one of the major reasons for the selection of Permira is the belief that they are the right investor to benefit our customers and employees. At the same time, Cisco will be able to clearly focus on its core priorities,” she advised.
“We look forward to our ongoing Service Provider market innovations in mass-scale networking, automation, optical, optics, cable access, and mobility. Combining these innovations with Cisco’s portfolio of go-to-market security, collaboration, IoT, and professional services, we will continue to enable service providers, media and web companies to reduce cost and complexity, help secure their networks, and to grow revenue,” she confirmed.
“We remain dedicated to the Service Provider business and to our Service Provider customers, as Chuck Robbins notes in today’s news release,” she added.
“I have spent much of my career in the media and video industry – it holds a special place for me. I am very happy for all parties about this announcement, and I hope you share my enthusiasm for this important change. It is a good day for the Service Provider video business, for our SPVSS employees, for our customers, and for Cisco,” she concluded.
According to Paolo Pescatore, VP, Multiplay and Media, at analyst firm CCS Insight, Cisco is following Ericsson in selling its video business to a private equity firm, and as such, is a reflection of the challenging landscape. “There are too many solution providers chasing too few dollars. Bottom line, many of these solutions providers have diversified and now need to focus on core areas. Despite this, the media and telecoms industries are closer than ever. There will be more casualties due to further disruption. This represents an opportunity for other providers who still focus on connectivity and delivery of video over the Internet,” he advised.