July 22, 2005 3:00 AM PDT

Linksys to buy consumer electronics start-up

Cisco Systems is dipping its toes in the consumer electronics business with the acquisition of a start-up in Europe.

On Friday, Cisco announced that its Linksys division will acquire privately held Kiss Technology of Hoersholm, Denmark, for $61 million in cash. This is the second acquisition Cisco has made for Linksys since it purchased the division in 2003. Cisco bought Sipura Technology, a maker of Net phone products, in April.

Cisco has built a portfolio of products around the Linksys brand, which includes voice over IP and wireless and networking equipment for home and small-office users. But this is the first purchase of a true consumer electronics company.

Kiss makes DVD players and recorders that can be connected to the Internet to also provide video on demand. Kiss has arrangements with content providers in Europe, including TV stations and video-on-demand service provider Movielink.

The Kiss networked DVD product is similar to a device and service offered by Akimbo, a start-up based in San Mateo, Calif. The Akimbo player is sold through retailers, and the company offers a $10-a-month service for content, which it hosts on its own servers. So far, Akimbo's business model hasn't taken off, namely because it is difficult to secure rights to content.

Kiss has already established a sales channel in Europe, and Cisco plans to continue selling the product there. But it has not yet disclosed plans for marketing the product in other parts of the world including the United States.

As the company has done with past acquisitions, Cisco will likely use pieces of the technology in other products it is developing. While Cisco executives haven't provided detailed plans for the technology, Jamie Tsao, senior vice president of sales and marketing for Linksys, emphasized that Cisco still sees itself as an infrastructure company and not a provider of consumer electronics gear.

The company is positioning itself as the leader in the wireless home, connecting home entertainment products like televisions, audio devices and gaming equipment and traditional data products, such as PCs, laptops and printers, through a wireless network, Tsao said.

"Kiss will be one element in connecting the Internet into the living room," Tsao said. "We view the Kiss device as a good way to tie together elements of the wireless home. We are not going to get into the consumer electronics business."

Cisco plans to keep most of Kiss' 65 employees in Europe with a handful joining the Linksys team in Irvine, Calif., Tsao said. The acquisition is expected to close in the first quarter of Cisco's fiscal year 2006, which starts Aug. 1.

 

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