Cisco Systems is acquiring Scientific Atlanta in a deal worth $6.9 billion, the companies announced before the stock markets opened on Friday morning.
Cisco (Nasdaq: CSCO) sees the acquisition as part of a “triple play” solution linking networks to digital homes. Cisco manufacturers networking gear.
Scientific-Atlanta (NYSE: SFA) is a leading provider of set-top boxes, end-to-end video distribution and video system integration for cable networks.
“The combined entity creates a world class, end-to-end triple play solution for carrier networks and the digital home,” Cisco said in a statement. Cisco also recently acquired Linksys, which provides a wide variety of home networking gear.
Scientific-Atlanta will operate as a division of Cisco once the deal is closed. The company currently has some 7,500 employees and reported fiscal 2005 revenues of $1.91 billion. The firm was founded in 1951.
Cisco agreed to pay $43 a share in cash for Scientific-Atlanta. The stock closed at $41.45 on Thursday, up $1.15, or nearly 3 percent.
Shares in the Georgia-based firm have risen from below $32 a share over the past month. The New York Post reported recently that the company was for sale.
Cisco shares closed at $17.37 on Thursday.
“Video is emerging as the key strategic application in the service provider triple play bundle of consumer entertainment, communication and online services,” said John Chambers, president and chief executive officer of Cisco Systems. “The combination of Cisco and Scientific-Atlanta brings unmatched experience and innovation in delivering large scale video systems and networks, and the addition of Scientific-Atlanta further extends Cisco’s commitment to and leadership in the service provider market. Moreover, Cisco’s international presence and IP leadership will also create strategic synergies that accelerate the combined growth opportunity.
“As consumers demand more sophisticated information and entertainment services in their home, tightly coupled applications, devices and networks will be essential,” he added. “The collective strength of Linksys and Scientific-Atlanta will extend Cisco’s leadership position across the entire networked digital home.”
Jim McDonald, chairman and chief executive officer of Scientific-Atlanta will remain with the firm and report to Mike Volpi, Cisco’s senior vice president. Scientific-Atlanta will become part of Cisco’s Routing and Service Provider Technology Group.
“We believe that this combination of Cisco and Scientific-Atlanta will benefit our shareholders, our customers and our employees,” McDonald said. “The combined strengths and resources of our two companies will position us to address more quickly the growing number of opportunities in the markets we serve and enable us to create new products and services that might not have existed otherwise.”