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Cisco adding Chinese maker of TV control boxes

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SAN JOSE, Calif. — Cisco (NASDAQ: CSCO) says it is buying the set-top box business of DVN (Holdings) Limited, based in China, for up to $44.5 million and setting up a go-to-market alliance for other DVN products and services.

Cisco will pay approximately $17.5 million up front for the part of DVN that makes the control boxes, Cisco said in an announcement late Tuesday. An additional maximum amount of $27 million is to be paid over four years based on the achievement of specific sales milestones.

Cisco said it expects the deal to close in the first half of 2010.

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 DVN CEO Terry Lui. It covers DVN's middleware and advanced applications as well as integration and support services, Cisco told investors.

"The alliance will provide joint customers with unparalleled end-to-end capabilities through the evolution from basic digital broadcast to advanced interactive services," Cisco stated.

The Wall Street Journal reported that the deal was largely about the set-top unit's management team, which is expected to stay on with Cisco, and being able to take advantage of the relationships that group has in place in China, says Hilton Romanski, Cisco’s vice president of corporate development.

"Cisco and DVN have similar cultures that emphasize video innovation and a shared vision to enable multimedia connected homes across China," Ken Klaer, vice president and general manager of Cisco's International Cable Business Unit. "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. 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, the equipment maker said.

"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."

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