Cisco Buys Into Video With Scientific-Atlanta

By Colin C. Haley

Wary of integrating unwieldy product lines and incompatible corporate cultures, Cisco (Quote, Chart) has chosen to either buy startups or partner with existing players rather than make large acquisitions.

But the San Jose, Calif., network equipment giant broke that pattern today, plunking down $6.9 billion cash for set-top box maker Scientific-Atlanta (Quote, Chart).

Cisco CEO John Chambers said video is ``too important`` to be handled through a partnership.

``We think it is a huge move for us in the service provider and consumer space,`` Chambers said during a conference call with reporters and analysts. ``Looking four or five years out, we think we will also expand it into our enterprise business.``

Offering Cisco routers and switches with Scientific-Atlanta set-top boxes and video distribution products will give service providers one-stop shopping for triple-play (voice, video and data) infrastructure, the companies said.

This is especially true in overseas markets, where Cisco`s relationships can open the door for Scientific-Atlanta, Chambers said.

On the consumer side, Chambers said he also sees the tight synergies between Scientific-Atlanta and Cisco`s Linksys division, which makes wireless routers and other home-networking gear.

Prior to the close, Cisco and Scientific-Atlanta will operate as separate businesses and will continue to work with their existing partners.

Scientific-Atlanta CEO Jim McDonald said the company would be reaching out to customers and partners in the next two days to discuss the transition.

Scientific Atlanta, which has 2,000 engineers, will join Cisco as an independent division once the deal closes. The transaction still requires regulatory and shareholder approval.