Today, Technicolor announced it has entered into an exclusive agreement with Cisco to acquire our service provider video customer premises equipment (CPE) business for $600 million (or €550 million equivalent) in cash and stock. The companies also signed a strategic partnership agreement to develop and deliver next generation video and broadband solutions and services. More on this announcement can be read in the Technicolor press release.
This transaction will bring together global leaders in networking, cloud, and the connected home to drive the future success of the service provider video CPE business and both companies’ next generation video strategies:
- With a rapidly moving and consolidating market, our shared customers will experience a seamless and smooth transition, and benefit from the continued innovation, focus and support of both companies,
- Our employees will help define the future of a successful, global organization with a 100-year history of innovation,
- The Connected Devices business’ industry-leading video and modem technologies will allow Technicolor to continue to innovate, deliver scale, and provide enhanced customer service, and
- Cisco will continue to refocus our investments in service provider video towards cloud and software-based services businesses.
Ten years ago we entered the set top box business because of the role it played in our service provider customers’ business. Connected devices have delivered $27 billion of aggregate revenue to Cisco since then. This technology continues to be critical for these customers. We are proud of the contribution this business and its people have made to Cisco over many years. This includes providing new innovations, expanding important markets, and deepening our service provider relationships. We now believe that the time is right, and Technicolor is the right partner, to take this business to the next stage of evolution and growth.
The Connected Devices business will end fiscal 2015 with revenue of approximately $1.8B. We expect the transaction to close at the end of our fiscal Q2FY16, subject to regulatory approvals. Until that time, the Connected Devices business will continue to operate as part of Cisco. On close, we expect to see a positive impact to Non-GAAP gross margins of approximately 1 point with negligible impact to the bottom line as we continue to invest in our video business.
The strategic partnership agreement with Technicolor will also ensure Cisco remains close to this business and our service provider customers. The proposed transaction will allow both companies to accelerate our investments in our respective strategic priorities, while working together to deliver value to the market.
I am also pleased to be joining the Technicolor board of directors after the close of the transaction. I look forward to bringing our two companies closer together, as we continue to help our service provider customers transform the future of video.
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