Streaming video helps to push Cisco out of cable and satellite pay-TV business
01 May 2018 | Alan Burkitt-Gray
Private equity company Permira has bought back part of the video service provider business it sold to Cisco for $5 billion in 2012.
The move follows only months after Ericsson also disposed of a chunk of its video service provider business to a different private equity investor. Both telecoms vendors have been hurt by the increasing delivery of streaming video over telecoms networks.
Cisco’s 2012 acquisition of what was then NDS – which focuses on delivery over cable and satellite networks – was one of its biggest M&As ever. NDS’s former chairman and CEO, Abe Peled, will return as chairman of the re-acquired company.
An Israeli business paper said Permira paid only $1 billion for the former NDS. Others said this was an over-estimate.
“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 said it will retain the video and media technology related to its core business in networking, multi-cloud, security, data, and collaboration. Neither it nor Permira has given a price for the deal.
Only three months ago One Equity Partners, another private equity company, bought 51% of Ericsson’s media solutions business for an undisclosed sum – but left alone Ericsson’s broadcast transmission services operation Red Bee Media, which is heavily loss-making.
Paolo Pescatore, CCS Insight’s VP of Multiplay and Media, commented: “It 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.”
Red Bee started out as BBC Broadcast and, after going through another set of private equity hands, was bought by Ericsson in 2014-15 to add to its existing portfolio that included Microsoft Media Room and Tandberg Television. Last year Ericsson reinstated the Red Bee name but so far has failed to sell it.
NDS has been through a similarly complicated history. Started 30 years ago with financial backing from Rupert Murdoch’s News Corporation – as it was – NDS focused on encryption and pay-TV technology for Murdoch’s Sky TV channels. Murdoch’s group bought it in 1992 for only $15 million. It still supplies Sky as well as AT&T’s DirecTV and a number of pay-TV services around the world.
Permira took a stake in 2009 for $3.6 billion and sold the lot three years later to Cisco, which renamed the business Videoscape, though tended to use Cisco Service Provider Video Software Solutions (SPVSS).
Yvette Kanouff, senior vice president Cisco Service Provider Business, said: “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.”
She added: “Cisco will retain the video and media technology related to our core business in networking, multi-cloud, security, data, and collaboration. 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.”
Peled said: “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.”
Pescatore noted: “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.”
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