PARIS AND SAN JOSE, CALIF.-After years of wrangling with investors about the future of its set top business, Cisco has announced that it is selling the division to Technicolor for $600 million in stock and cash. The deal will make Paris-based Technicolor one of the world's largest providers of set-top boxes (also referred to as gateways or customer premises equipment ), with a market share of 15 percent.
Under the terms of the agreement, upon the closing of the transaction, Cisco will receive approximately 413 million ($450 million) in cash and approximately 137 million ($150 million) in newly issued Technicolor shares, subject to certain adjustments provided for in the agreement. The deal is expected to close by the end of the year or by the first quarter of 2016.
With this acquisition, Technicolor will be shipping more than 60 million devices annually, with an installed base of 290 million set-top boxes and 185 million gateways in more than 100 countries. It is expected to generate 3 billion (approx. $3.3 billion) of pro-forma revenues in 2014, doubling Technicolor's revenues in the Connected Home segment. Technicolor and Cisco will form a strategic partnership to develop and deliver new devices that will extend the two company's platforms into additional communications devices based on IoT (Internet of Things) technology.
The strategic relevance of video to every consumer, business, city and country around the world is only growing, and the market is moving rapidly, said John Chambers, Chairman and CEO of Cisco. This is the right time and we have the right company in Technicolor to drive the future of the CPE business to deliver what our customers and partners need, today and into the future. At Cisco, we are prioritizing our investments to deliver on our strategy of video in the cloud, and will partner with Technicolor to position the CPE business and employees for future success.
Technicolor's acquisition is the latest move in an industry that has seen new entrants come and go in recent years. The market has experienced a decrease in set-top box shipments amid growing interest in cord cutting and OTT services such as Apple TV and Roku, as well as a decline in pay-TV subscriptions worldwide. Ten years ago, Cisco entered the business with the acquisition of Scientific-Atlanta, but in recent years, investors and others have complained that the division was not a good fit with Ciscos core business. Three years ago, Google acquired Motorola's set-top box business after buying Motorola Mobility Holdings. Shortly thereafter, it sold off the STB division to ARRIS Group for $2.35 billion. In May, ARRIS Group acquired European set-top box maker Pace for $2.1 billion, making it the largest provider of pay-TV boxes in the world.
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PARIS AND SAN JOSE, CALIF.-After years of wrangling with investors about the future of its set top business, Cisco has announced that it is selling the division to Technicolor for $600 million in stock and cash. The deal will make Paris-based Technicolor one of the world's largest providers of set-top boxes (also referred to as gateways or customer premises equipment ), with a market share of 15 percent. 
