Light Reading
Also: Liberty Horizon TV subs breaks 100K mark; M&A wave hits Tier 2 cable; sub growth drives DirecTV's Q4; FCC not laughing about zombie hoax

Cisco Backs Away From 'Low-Margin' STB Deals

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
2/14/2013
50%
50%

Welcome to today's cable and broadband news roundup.

  • Cisco Systems Inc. still loves set-tops, but apparently just the most profitable ones. Cisco is "walking away" from potential deals involving lower-margin boxes, a class that presumably includes IP clients, company Chairman and CEO John Chambers said on Wednesday's second-quarter call. [Ed. note: We've asked Cisco to clarify.] "We have been more selective in the business … in terms of set-top boxes, and the lowest margin boxes in particular," Chambers said. "If it's purely a bid that is on very poor margins, we're not even going to bid." Cisco is emphasizing this strategy in Europe, and that was reflective in the second-quarter numbers, as revenues for the EMEA (Europe, the Middle East and Africa) region reached US$3.09 billion, down from $3.2 billion in the year-ago quarter. The shift comes about a year after Cisco defused rumors that it might try to sell its set-top business. Wednesday's revelation likely means Cisco will apply focus on higher-end devices, such as multi-service gateways, that share content with IP devices on the home network and rely on cloud-based apps and user interfaces. Driven by its integration of NDS, Cisco is "evolving from low-margin set-top box business to more of a profitable and strategic Videoscape architecture in the cloud," Chambers said. (See Cisco: 'We Love Set-Top Boxes'.)
  • High-end gateways are central to the plan at Liberty Global Inc., which is using NDS (Cisco) as a key vendor partner for its Horizon TV platform. Liberty Global President and CEO Michael Fries said on the company's fourth-quarter call that the operator has sold more than 100,000 Horizon TV subscriptions in the five months since its launch. The operator has introduced Horizon TV in the Netherlands and Switzerland, with Germany and Ireland coming online later this year. But Horizon TV has yet to put a stopper in video sub losses -- Liberty Global still shed 28,000 video customers in the period. (See Liberty Global Embarks on New TV Horizon.)
  • Expect M&A action in cable's Tier 2 circuit to stay hot: Private equity firm GTCR has struck a deal to buy NewWave Communications from Pamlico Capital for an undisclosed sum. GTCR is completing the deal in partnership with Rural Broadband Investments, a company formed last year aimed at acquiring broadband networks in small and mid-sized markets. NewWave serves about 90,000 customers and passes 250,000 homes in rural parts of Illinois, Indiana, Missouri and Arkansas. And NewWave is just the start. RBI said the deal will be the first in a series of buys as it looks to acquire systems that, in total, will serve 300,000 to 400,000 cable subs.
  • DirecTV Group Inc. fourth-quarter net income rose 31 percent, to $942 million, thanks in part to a $111 million pre-tax gain tied to the sale of its 18 percent stake in the Game Show Network. Subscription growth helped to drive revenues up 8 percent, to $8.05 billion. DirecTV added nearly 761,000 net subscribers (including a record 658,000 in Latin America) in the period, extending its worldwide total to 35 million.
  • The Federal Communications Commission (FCC) isn't laughing at an emergency alert system (EAS) hack that issued a warning of an imminent zombie attack. In the wake of the hoax, the FCC is urging TV stations and cable operators to shore up the defenses of their EAS systems, including the resetting of default passwords, reports Multichannel News. The EAS hoax spread to several local TV stations, including KRTV (CBS) in Great Falls, Mont.; WBUP-WBKP (ABC) and WNMU (PBS) in Marquette, Miss.; and KENW in Portales, N.M. (PBS), according to this this roundup. Here's a sample of what the fuss was about: — Jeff Baumgartner, Site Editor, Light Reading Cable



    (6)  | 
    Comment  | 
    Print  | 
  • Newest First  |  Oldest First  |  Threaded View
    jtombes
    50%
    50%
    jtombes,
    User Rank: Light Beer
    2/15/2013 | 10:38:45 PM
    re: Cisco Backs Away From 'Low-Margin' STB Deals
    Since you referred to a cross-industry trend: Maybe Amazon is a stellar counter example to the low-margin fad? Yet some bears (shorting AMZN) fear it is what happens when you get trapped in a deceptively attractive low-margin box. A mixed menu sounds prudent. "Would you like a million instances of some relatively higher margin EC2 to go along with that box of give-away Kindles?"
    jtombes
    50%
    50%
    jtombes,
    User Rank: Light Beer
    2/15/2013 | 9:12:28 PM
    re: Cisco Backs Away From 'Low-Margin' STB Deals
    And Huawei? Never know when they may show up. They impacted pricing on DTAs, for instance.
    mendyk
    50%
    50%
    mendyk,
    User Rank: Light Sabre
    2/14/2013 | 10:16:09 PM
    re: Cisco Backs Away From 'Low-Margin' STB Deals
    The obsession with higher margins is a fad that cuts across a number of industries. It plays to the idea that organizations should be managed to their share price rather than to their long-term well-being. Taken to its illogical conclusion, a company like McDonalds would stop selling burgers and just focus on drinks. Margins would shoot up .... for a while.
    gregwhelan
    50%
    50%
    gregwhelan,
    User Rank: Lightning
    2/14/2013 | 7:22:25 PM
    re: Cisco Backs Away From 'Low-Margin' STB Deals
    The problem with a "high end" only strategy is the low end vendors will be getting Million unit pricing for semi-conductors and the high end vendor will be getting 100k unit pricing. -áSince there are many common components the low end will be able sell "high end" STBs at lower prices with higher margin. -áThus a high end only strategy is unsustainable and a sure path to market irrelevance. -áThe argument that STB are commodities at the HW level anyway only makes sense in the short term. -áThe SW equivalent of Moore's Law, i.e., SW gets better with every release, -áwill mitigate any software advantage over time.-á
    craigleddy
    50%
    50%
    craigleddy,
    User Rank: Blogger
    2/14/2013 | 6:25:06 PM
    re: Cisco Backs Away From 'Low-Margin' STB Deals
    How can you talk about set-top boxes at a time like this, when a zombie attack is imminent? I'm gonna go git my shotgun.-á

    You gotta love hackers with a sense of humor. -á
    Jeff Baumgartner
    50%
    50%
    Jeff Baumgartner,
    User Rank: Light Beer
    2/14/2013 | 4:41:07 PM
    re: Cisco Backs Away From 'Low-Margin' STB Deals
    Although Europe appears to be the focus of this shift in focus, it would appear that Cisco will be conceding the market for devices like the Comcast Xi3 to the likes of Pace, Humax and the other vendors that decide to jump in for those potentially high-volume but low-margin HD IP-only client boxes. JB-á
    Flash Poll
    LRTV Huawei Video Resource Center
    Sales Director of INIT on Plug & Play Switch Devices

    9|19|14   |   3:21   |   (0) comments


    INIT Italy uses both the Huawei S5700 and S7700 series switches for the campus LAN environment. Sales Director Andrea Curti says their company chose these Huawei devices over others because of their performance, flexible scalability and plug-and-play features.
    LRTV Huawei Video Resource Center
    Saudi Arabia Upgrades Vocational Training System

    9|19|14   |   3:31   |   (0) comments


    The Technical and Vocational Training Corporation (TVTC) has 100,000 students, 150 government-owned institutions and oversees 1000 private institutes. The CIO of TVTC explains that Huawei devices have allowed them to manage multiple datacenters using just one software program, scientifically tracking the progress of students and teachers, saving them millions.
    LRTV Huawei Video Resource Center
    Huawei's Media Solutions Are Here to Stay

    9|19|14   |   4:35   |   (0) comments


    The current media revolution requires rapid upgrades in technology. New formats (HD, 3D, 4K etc.) and the subsequent explosion of file sizes demand sophisticated network and storage architecture. Social media and the multiple distribution channels require a robust asset management system. Gartner analyst Venecia Liu speaks about the current technological trends in ...
    LRTV Huawei Video Resource Center
    Microgenesis on Huawei's Switches

    9|19|14   |   3:57   |   (0) comments


    Microgenesis is a solutions and system integrator company in the Philippines whose areas of expertise include data centers, networking and security products. In this video, Executive Director Jeffrey Choa talks to us about his customers needs and they benefit from using Huawei switches.
    LRTV Huawei Video Resource Center
    Network Solutions Help the Philippines Jump Ahead

    9|17|14   |   2:59   |   (0) comments


    In the past, the Philippines has under-invested in technology. Now, the CEO of Softshell talks about how Huawei products help the Philippines jump ahead as the economy improves.
    LRTV Huawei Video Resource Center
    VCS Observation for Safer Cities in the Netherlands

    9|17|14   |   5:20   |   (0) comments


    Holland's VCS Observation has been operating for 22 years. Its main goal is to get cities safer. CEO Wim van Deijzen tells us some of the challenges his company faces and how Huawei is helping to overcome these challenges.
    LRTV Huawei Video Resource Center
    A Conversation With Serbia's Ministry of Interior

    9|17|14   |   4:38   |   (0) comments


    At HCC 2014, the Assistant Minister of the Ministry of Interior of the Republic of Serbia talks to us about his projects and corporation with Huawei. Solutions like Safe City and E-Government and services like cloud computing are just some of the areas his department is interested in.
    LRTV Huawei Video Resource Center
    IHS Analyst Discusses eLTE at CCW 2014

    9|10|14   |   7:09   |   (0) comments


    Thomas Lynch, associate director of critical communications at IHS Technology, talks about broadband in critical communications.
    LRTV Huawei Video Resource Center
    TCAA on Huawei eLTE: A Broadband Solution for Mission-Critical Communications

    9|10|14   |   2:29   |   (0) comments


    At CCW2014 in Singapore, the TCCA's Phil Kidner talks about the importance of broadband data for critical communications.
    LRTV Custom TV
    Spotlight on Cisco: SDN for Optical Networks

    9|8|14   |   9:27   |   (0) comments


    Cisco's Greg Nehib talks OpenFlow and more on the 'Software-Defined Networking for Optical Networks' panel at the Big Telecom Event in June 2014.
    LRTV Custom TV
    Cisco's Evolved Programmable Network (EPN)

    9|8|14   |   4:05   |   (0) comments


    A look at the various demos Cisco showed at Light Reading's Big Telecom Event highlighting Cisco's EPN innovation and how SDN and NFV technologies are enabling a variety of new services.
    LRTV Huawei Video Resource Center
    The Future of Ultra-Broadband, With Kevin Kelly (UBBF2014)

    9|5|14   |   1:13   |   (1) comment


    If you think the technological changes we've seen up to now are astounding, just wait until you see what the future has in store. Discuss upcoming breakthroughs with Kevin Kelly, Founding Executive Editor of Wired Magazine, at the Huawei Ultra-Broadband Forum on September 24.
    Upcoming Live Events!!
    September 23, 2014, Denver, CO
    October 29, 2014, New York City
    November 6, 2014, Santa Clara
    November 11, 2014, Atlanta, GA
    December 2, 2014, New York City
    December 3, 2014, New York City
    December 9-10, 2014, Reykjavik, Iceland
    June 9-10, 2015, Chicago, IL
    Infographics
    A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
    Today's Cartoon
    Vacation Special Caption Competition Click Here
    Latest Comment
    Hot Topics
    AT&T: We'll Bundle Fixed Wireless & DirecTV
    Mari Silbey, Independent Technology Editor, 9/15/2014
    New NFV Forum Focused on Interoperability
    Carol Wilson, Editor-at-large, 9/16/2014
    NFV & The Data Center: Top 10 Takeaways
    Sarah Reedy, Senior Editor, 9/18/2014
    Photos: Qualcomm Takes Over San Francisco
    Sarah Reedy, Senior Editor, 9/19/2014
    Connecticut Cities Crowdsource Gigabit Nets
    Jason Meyers, Senior Editor, Utility Communications/IoT, 9/15/2014
    Like Us on Facebook
    Twitter Feed