Is TiVo next on Cisco's push into homes?

If its history of acquisitiveness is a guide, computer networking king Cisco Systems will likely buy a number of companies as it expands into the consumer electronics market.

Already Cisco has announced plans to spend $6.9 billion on cable set-top maker Scientific-Atlanta. When the deal closes in the next couple of months, it will be the third significant acquisition Silicon Valley-based Cisco has made in the consumer realm.

The question now is, who's next? Will Cisco take a hard look at troubled but well-known TiVo, the maker of digital video recorders? What about Nintendo, maker of video game consoles? Or what about Sling Media, a start-up with technology that lets people watch cable television on their laptops or mobile devices with a broadband connection?

Though Cisco executives certainly won't say who they're looking to buy, there are some hints as to which consumer electronics companies they're considering for partnerships.

According to a source familiar with Cisco and TiVo, there's a "potential for an interesting partnership" to emerge between the two companies. TiVo, the source said, has held discussions with many potential partners.

There's no indication that Cisco is looking to buy TiVo, and details regarding a potential partnership are scant. But Cisco's recent acquisitions do suggest how serious the company is about becoming a major presence in the living room, and TiVo carries weight as a well-known consumer DVR brand. At the same time, Cisco could help TiVo regain the distribution clout it lost when satellite TV provider DirecTV said it was walking away from a longtime partnership with TiVo.

Representatives from both Cisco and TiVo said they would not comment on rumors.

Cisco, best-known for making switches and routers that shuttle IP traffic around corporate networks and throughout the Internet, has for years used acquisitions as a way to enter new markets quickly and to round out its technology and product portfolios. In the past two decades, it's acquired more than 100 companies.

The 2003 acquisition of Linksys, a maker of wireless home-networking equipment, was the company's first foray into the consumer market. Two years later, the first hint of a Cisco home entertainment strategy emerged with the company's acquisition of a small European business called Kiss Technology, a maker of DVD and DVR players.

In November 2005, Cisco took its biggest step into the living room. It agreed to buy Scientific-Atlanta, the No. 2 supplier of set-top boxes to cable operators. The deal, once completed, will instantly put Cisco in millions of homes.

If Cisco builds its consumer business the same way it built its enterprise business, it will likely make several more acquisitions, both large and small, to fill in product gaps and improve on its existing technology.

The company's consumer strategy has two main components, Chris Stevens, a vice president and general manager for Cisco's Linksys home networking division, said in a recent interview with CNET News.com.

First, Cisco plans to enhance the Linksys home-networking portfolio with products that increase the speed and ease-of-use of home networks based on IP technology. Second, it wants to sell consumer electronics products, which it hopes will help drive traffic demand for the network.

Cisco has already begun fulfilling this strategy with both the Kiss and Scientific-Atlanta acquisitions.

"If you want to figure out where we are going, just look at the building blocks we are already assembling," Stevens said. "The elements we already have in the portfolio provide us key capabilities that fit into an end-to-end solution."

First on the list of companies that would fit neatly into Cisco's plans is a start-up called Ruckus Wireless, which has developed a small Wi-Fi adapter tailored for video.

[R. U. Sirius]

Direct to consumer? Why?

This would seem to indicate that either the enterprise market is becoming a dead end or that Cisco truly believes the home market is poised for rapid growth. <br /><br />While both scenarios may be partially true, the troubling thing is how will Cisco handle the fickle consumer market when Cisco has no real history in dealing with consumer level products?

[ajbright]

I doubt it

I doubt that they would go direct to the consumer as this story implies - it would make more sense to leave the customer relations and sales to third parties such as large electronic/computer stores.<br /><br />The only part of this story that makes any sense is that soon an easy to use device that has the power to route large amounts of data around the home will be desired by more and more people - especially those with dvrs that want to transfer their media to other devices.

[ajbright]

I doubt it

I doubt that they would go direct to the consumer as this story implies - it would make more sense to leave the customer relations and sales to third parties such as large electronic/computer stores.<br /><br />The only part of this story that makes any sense is that soon an easy to use device that has the power to route large amounts of data around the home will be desired by more and more people - especially those with dvrs that want to transfer their media to other devices.

[flipj]

Its the software, stupid!

Cisco may be great in routers and network devices, but they would be doing everyone a favor it they acquired TIVO. As one who has used an SA DVR from Time Warner for several years, I KNOW the Tivo software is vastly superior. SA and the other set-top builders make products to MSO spec, not to consumer electronics spec. Put a Tivo in an SA box and you would have a killer device. Its all about the software (if the iPod hasn't taught us anything else...)

[bobby_brady]

Does Tivo even make money? Reminds me when Novell bought WordPerfect

Even if they do, they'll have to compete with hard drives integrated into cable boxes, and Windows Media Center (which has a free guide). <br /><br />I think the only real company that might purchase Tivo would be AAPL since they already have video/audio for sale. <br /><br />Cisco purchasing Tivo is stupid. Reminds me when Novell purchased WordPerfect.

[schubb]

Not really

They just bought Scientific Atlanta(so they already "compete with hard drives integrated into cable boxes", I have an SA cable box, I have a friend with TiVo and that is vastly superior to mine. Motorola's software is vastly superior having been a comcast customer, had I not moved I would not have changed for that box alone. Put TiVo into an SA box and they become #1 in set top boxes by a large margin. They get the TiVo subscribers, plus all of the cable companies who use the boxes. I would beg Time Warner to get a TiVo comparable box and get rid of my current box.

[El Kabong]

Did I miss something?

It seems the point is that Cisco, long known for its enterprise devices, is now looking to own, develop, manufacture, whatever, consumer oriented devices.<br />Most of the organizations mentioned as acquisitions or probable targets already have direct contact with consumers so there is no need for Cisco to reinvent that wheel.<br />I think Cisco is able to foresee something many computer techs have denied for a long time... massive increases in home use of networking, storage, and interface devices resulting from convergence of almost every system in the home. Not just entertainment but HVAC, nutritional logistics, health monitoring, etc., etc., etc.<br />Cisco has the reputation, the technological prowess, and the vision to do more than just "ride the wave". They are maneuvering into a position to shake things up and create the waves.

[johnnybluffsf]

Nintnedo No. 3?

Hmm.. Maybe be so. With all those consoles they make (GameBoy, <br />GameCube, DS) it would not seem likely that Microsoft would be <br />selling more conosles than Nintendo. Can somebody please verify <br />that XBOX and XBOX 360 combined outsell Nintendo's offerings? <br />Nintendo is a very profitable company as well.. As for XBOX, well <br />we all know how it stays in business while it loses billions of <br />dollars. I highly doubt Nintendo will be bought by Cisco.

[shaqueefa]

indeed

the gamecube is in last in terms of sales in the US. but with the GBA and the DS, they've sold much more systems.<br /><br />Xbox is far behind both the gamecube and ps2 in japan, with the ps2 being in the lead in console sales...(due partly, i think, to the fact that the ps2 was poorly manufactured and people still go back to them to get a replacement system. i was done with them after my ps2 mysteriously stopped reading most discs.)<br />anyway...now, nintendo is doing very well in japan. 9 out of the top ten best selling games right now are nintendo games. and 7 out of the 10 are actually published by nintendo.<br />the gamecube gets so little attention in the US cause gamers here are stupid! they have no idea what makes a game good. they'll buy anything...which is why a game like "25 To Life" is on the top 5...for both the ps2 and xbox. the game got horrible ratings but i guess they'd rather play garbage, then risk their dignity by playing nintendo made games, which in their opinions, are for kids.

The Nintendo suggestion is naive and comical

I'm sorry, but the suggestion that Nintendo would sell out to Cisco <br />is cub-reporter stuff: naive and downright funny. I laughed out <br />loud when I read this. Nintendo turned down a buyout from <br />Microsoft as MS was readying the Xbox, and Microsoft would have <br />actually been a good fit.<br /><br />Who comes up with this stuff?

[AlphaTwo]

MS's attempt to purchase Nintendo

To be precise:<br /><br />From the Book: Opening the Xbox<br /><br />"Microsoft was at one point all set to plunk down 25 billion for the Japanese game giant. As the book describes, Nintendo's U.S. president Minoru Arakawa wasn't sure what to think when Microsoft made the offer. "I was surprised," Arakawa admitted. "We didn't need the money. I thought it was a joke.""<br /><br />25 Billion, and Nintendo turned it down. Exactly how much is Nintendo really on sale for then?