chowjBy Joe Chow, Vice President and General Manager, Connected Devices Business Unit

Following Cisco’s 2Q FY ’13 earnings call last week, we received questions about our commitment to certain elements of our set-top box business. Comments were made that Cisco is walking away from low-margin deals. I would like to clear up any confusion surrounding those comments here.

Cisco remains committed to providing world-class managed customer premise equipment (CPE), which includes digital set-tops, intelligent media gateways and other devices. CPE is an integral part of Cisco’s end-to-end Videoscape TV services delivery platform. For emerging markets, CPE enables Cisco to offer a complete end-to-end solution for new customers as they launch and grow their digital platforms. For customers with more advanced video platforms and in more advanced video markets, CPE provides a key strategic advantage and opportunity for Cisco.

As service providers transition from traditional video architectures where intelligence resides in end-point devices to new architectures with intelligence migrating to the cloud and network, set-top solutions are also evolving. Traditional video set-tops are transforming into intelligent video and data gateways with more advanced software features and services. These new unified gateways deliver video and other services to basic set-top boxes or consumer purchased end-point devices such as tablets or televisions. This architecture enables service providers to extend their network deeper into consumers’ homes, providing a more synchronized and immersive experience for their consumers.

Cisco’s investment focus continues to shift toward intelligent video and data gateways, which will allow our customers to accelerate their migration to new video architectures and next generation customer experiences. As service providers migrate to these new architectures, the need for basic, traditional set-tops will reduce over time. While Cisco continues to offer traditional set-top products as part of an end-to-end portfolio and solutions for key customers, Cisco has made the decision to walk away from lower margin set-top box opportunities where we are not delivering value as part of a more holistic video solution.

For the emerging markets that are launching and expanding their digital footprint, Cisco will continue to support strategic opportunities for traditional set-tops that will drive the growth of digital video. Cisco has and will continue to evaluate each opportunity based on our business objectives. When warranted, Cisco will continue to support these opportunities as a step in the migration to a gateway/client and cloud-based solution.