Cisco Systems says its $5 billion acquisition of NDS Group will position it to help service providers profit from video. The networking giant says service providers need to be ready to offer customers traditional TV shows, online content, social media and video apps on mobile devices as well as on television sets. Cisco (CSCO) launched its Videoscape service earlier this year to enable those solutions, and it says the NDS acquisition is the latest step in that strategy. NDS Group makes software for pay TV and cable companies, and is partially owned by News Corp., one of its biggest customers. The NDS buy follows Cisco’s acquisitions of videoconferencing companies of Tandberg (2010) and WebEx (2007).
For Cisco, the NDS deal makes sense technically, geographically, and strategically. The company has already made a significant commitment to cloud-based video delivery and this acquisition will allow it to leverage that investment with what is arguably best-of-breed technology for video encryption and delivery. Geographically, the deal should open new doors in China and India, both markets where NDS has a strong presence. And strategically, this deal helps Cisco move into software at a time when the network equipment business is difficult. Networking companies are working hard to complement their hardware offerings to carriers with higher-margin software products, which help service providers differentiate their products and monetize their customers.
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