Cisco announced a
definitive agreement to acquire the set-top box business of DVN
(Holdings) Limited, (SEHK: 0500). Listed in Hong Kong with major
operations in China, DVN is a market and technology leader in digital
cable solutions in China and shares Cisco’s vision of a
high-performance, scalable and services-rich cable interactive platform
extending into every home.
Under the terms of the agreement, Cisco will pay up to $44.5 million
for the set-top box business of DVN. Of this amount, approximately
$17.5 million will be paid up front, with an additional maximum amount
of $27 million to be paid over four years based on the achievement of
specific sales milestones. The acquisition is expected to close in the
first half of calendar year 2010 subject to standard closing
conditions, DVN shareholder approval and regulatory approvals.
In addition to the acquisition, Cisco has entered into a
go-to-market alliance with the remainder of the DVN organization —
which will continue to be led by current DVN CEO Terry Lui — in order
to utilize the company’s middleware and advanced applications as well
as integration and support services. The alliance will provide joint
customers with unparalleled end-to-end capabilities through the
evolution from basic digital broadcast to advanced interactive services.
"Cisco and DVN have similar cultures that emphasize video innovation
and a shared vision to enable multi-media connected homes across
China," said Ken Klaer, vice president and general manager,
International Cable Business Unit at Cisco. "With this acquisition, we
will offer customers the powerful combination of DVN’s products with
the Cisco® IP Next-Generation Network (IP NGN) platform, and Cisco will
be well positioned to engage in the largest digital transformation
opportunity in the world today."
The Chinese cable market is currently the largest in the world with
160 million subscribers and is predicted to grow to as many as 200
million over the next three to five years. Currently, only about
one-third of the market has converted to digital cable. With the
Chinese government mandating full digitization by 2015, this represents
an important long-term opportunity for Cisco.
"Cisco’s global technology leadership and breadth of services
combined with DVN’s market-leading solutions and talented employee base
will ensure that Chinese consumers continue to receive superior digital
services today and are provided with world-class advanced technologies
moving forward," said DVN CEO Terry Lui. "Cisco has demonstrated a
strong commitment to the Chinese market, and I look forward to working
with them as part of our ongoing alliance."
Between the signing of the agreement and the close of the
acquisition, Cisco and DVN’s set-top box businesses will continue to
operate as separate companies. Upon completion of the transaction, the
DVN set-top box business will become a part of the International Cable
Business Unit within the Service Provider Video Technology Group
(SPVTG) at Cisco led by Klaer. Under the terms of the agreement, the
two companies expect to work together with the aim of providing
uninterrupted service to set-top box customers and to prepare for an
orderly transfer of the business.
The DVN business will run end-to-end from within China – from
design, sourcing and logistics through to marketing, sales and service.
This is an important milestone for Cisco, not only in China, but for a
broader strategy toward competing in emerging markets with locally
designed and produced solutions.
The investment is part of Cisco’s ongoing long-term commitment to
China and its belief in cultivating local innovation and talent. In
April of this year Cisco introduced a "cultivated innovation" model
aimed at boosting local innovation through capital, technology, process
expertise, incubation resources and leadership investments.