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Secure Transactions News

Cisco to acquire NDS for US$ 5 billion

Thursday 29 March 2012

John T. Chambers, Cisco’s chief executive, said in an interview that “this aligns 1:1” with one of Cisco’s major businesses, video, and customer segments, large service providers. He said it also aids Cisco in providing more products and services in cloud computing, and in “moving Cisco to a more software-centric company.”

Under the terms of the agreement, Cisco will pay approximately US$ 5 billion (EUR 3.8 billion), including the assumption of debt and retention-based incentives, to acquire all of the business and operations of NDS. The acquisition has been approved by the boards of directors of both companies. The acquisition is expected to close during the second half of calendar year 2012, subject to customary closing conditions, including regulatory review in the United States and elsewhere. Prior to the close, Cisco and NDS will continue to operate as separate companies. Upon completion of the transaction, NDS’s global operations, including sites in the United Kingdom, Israel, France, India and China, and its approximately 5,000 employees will join the Cisco Service Provider Video Technology Group (SPVTG), led by Senior Vice President and General Manager Jesper Andersen.

NDS uses the combination of a software platform and services to create differentiated video offerings for service providers that enable subscribers to intuitively view, search and navigate digital content anytime, anywhere and on any device. The addition of NDS’s software solutions, such as the end-user viewing client and content security solutions, combined with its systems integration expertise, will accelerate the delivery of the Cisco’s Videoscape, a comprehensive platform that enables service providers and media companies to deliver next-generation entertainment experiences. Acquiring NDS will broaden Cisco’s opportunities in the service provider market, expanding its reach into emerging markets, such as China and India, where NDS has an established customer footprint.

NDS is owned by the private equity firm Permira and the media giant News Corporation. Permira, one of Europe’s largest private equity firms, bought NDS with News Corporation in 2009 (cf. Smart Insights Weekly #08-38) for US$ 3.6 billion (EUR 2.7 billion). Permira is expected to make roughly US$ 2 billion (EUR 1.5 billion) on the sale, based on calculations from regulatory filings by NDS. That would more than double the private equity firm’s initial US$ 900 million (EUR 680 million) investment three years ago.

This is Cisco’s third-largest acquisition ever. Cisco paid about US$ 6.9 billion (EUR 5.2 billion) for Cerent, a maker of optical switches, at the height of the 1999 dot-com boom. Cisco also paid US$ 6.9 billion in 2005 for Scientific Atlanta, a maker of set-top boxes. In size and intention, the NDS deal is more like Cisco’s 2007 purchase of WebEx, a maker of videoconferencing software, for US$ 3.2 billion (EUR 2.4 billion), or its 2010 buy of Tandberg, which is also in the videoconferencing business.

NDS Group creates the technologies and applications that enable pay-TV operators to securely deliver digital content to TV STBs (set-top boxes), DVRs (digital video recorders), PCs, mobiles and other multimedia devices. Over 90 of the world’s leading pay-TV platforms rely on NDS solutions to protect and enhance their business.

NDS’ VideoGuard is a major content and service protection solution, deployed in 125 million pay-TV households, with British Sky Broadcasting and DirecTV among its customers,. VideoGuard conditional access (CA) and digital rights management (DRM) technologies safeguard pay-TV service revenues exceeding US$ 50 billion (EUR 37.8 billion). NDS middleware, which enables a host of advanced services for subscribers, has been deployed on 214 million devices. NDS DVR technology, centered around XTV, is a leader in the global industry with 47 million units deployed. (Deployment figures as of 31st December 2011). NDS also has a strong presence in emerging markets like the Asia Pacific, India and China. Of the 125 million homes worldwide where NDS is present, 20 million are in India and 15 million are in China. The penetration in India was achieved in three years

NDS had revenue of US$ 957 million (EUR 724 million) in the fiscal year ended June 30, according to a regulatory filing. It reported income of US$ 252 million (EUR 190 million). A significant portion of NDS’s software, services and content protection business is recurring, with long-term contracts, typically with an average duration of approximately five years.

Headquartered in Staines, UK, with over 5000 employees, NDS remains committed to investing in technology and development with over 75% of its employees dedicated to pioneering work at development centers in France, India, Israel, Korea, UK and US. NDS has 475 patents issued and another 500 pending.