Cisco's latest telecom move

25 Aug 2006

Cisco Systems, a company seemingly constantly on the acquisition trail, has gobbled up another company in the telecom space: Arroyo Video Solutions, a privately held software provider of next-generation, video-on-demand solutions. The latest purchase is Cisco's fifth this year.

Cisco is paying $92 million in cash for the company, which will be integrated into Cisco's Cable and Video Initiatives Group by year's end. That group is part of the company's service provider organization led by Cisco senior VP Mike Volpi.

This latest move further advances Cisco's entrance into the consumer space, and it is aimed at strengthening Cisco's position with service providers who play an integral role in the company's plans to enable and equip future converged networks.

Volpi characterized the Arroyo acquisition as one that offers service providers the ability to capitalize on a major shift that sees the entertainment industry evolving from pure video-on-demand to anything-on-demand, with a wide variety of content delivered to any device: handsets, personal computers, standard televisions and emerging media.

"With the addition of Arroyo's innovative software, which offers flexibility in content delivery, service providers will be in a position to serve content, how, when and where consumers want it," Volpi explained.

Kip Compton, Cisco's senior director if IPTV and video development, says the Arroyo acquisition follows in the footsteps of last year's huge $6.9 billion purchase of set-top box manufacturer Scientific-Atlanta. "That provided the hardware component, but one gap we had was an on-demand component," he says. "Arroyo provides that and takes a more software-centric approach that makes it easier to integrate their technology into the network." Cisco and Arroyo, which was founded four years ago and has 44 employees who will be retained by Cisco, have collaborated over the last few years on several projects.

Cisco already has a number of large cable and telco customers; Arroyo's expertise will now provide an on-demand component to Cisco's existing NGN solution. "It will result in a broadened solution over time for cable carriers and large telco players," adds Compton. Many of those service providers are pressuring equipment vendors like Cisco to provide a competitive edge in offering triple-and quadruple-play solutions to customers.

The acquisition seems an easy and relatively predictable one for Cisco, but it's unclear how other next-gen network providers ranging from Alcatel to Microsoft might respond to an increasingly more aggressive Cisco.

(Al Senia is editor of America's Network magazine and can be reached at [email protected])

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