Light Reading

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
    From The Founder
    Networks of the future will rely on "white box" switches and servers rather than proprietary hardware and that's going to alter the shape of the communications industry. Who says so? John Chambers.
    LRTV Huawei Video Resource Center
    eLTE Rapid Meets the Need for Speed

    3|26|15   |   4:45   |   (0) comments


    Designed especially for emergency and dedicated ad hoc local mobile communications coverage, Huawei's eLTE Rapid solution can deliver trunked voice, video and data coverage for multiple users over a 6km range and be set up in just 15 minutes, explains Huawei's Norman Frisch.
    LRTV Huawei Video Resource Center
    On Videos: Challenges & Opportunities

    3|26|15   |   5:56   |   (0) comments


    Most everything is now connected. And along with 4K and 4G technologies, everyone could be creating and broadcasting video contents. Users are expecting better video experience with any screen, anywhere and anytime. Operators will meet new challenges, but also see some big opportunities.
    LRTV Custom TV
    JDSU: Delivering Dynamic Networks for a Personalized Experience

    3|26|15   |   5:59   |   (0) comments


    Light Reading speaks to JDSU at Mobile World Congress 2015 about new solutions in the areas of HetNets, VoLTE, backhaul, virtualization, big data analytics, and real-time intelligence.
    LRTV Custom TV
    Smarter Service Chaining & New Ways to Benefit From Qosmos Technology

    3|25|15   |   03:11   |   (0) comments


    David Le Goff, director of strategic and product marketing at Qosmos, explains how the company has added application awareness to subscriber information to make service chaining more efficient and reduce costs for networking and infrastructure. In addition, Qosmos technology, which has been delivered as C libraries, is now also available as a virtual machine, ...
    Between the CEOs
    Qosmos CEO: The Changing Face of DPI

    3|24|15   |   13:53   |   (0) comments


    LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures. Also, how the comms market is becoming more like the automotive industry.
    LRTV Huawei Video Resource Center
    FC Schalke Scores With Its Agile Stadium

    3|24|15   |   6:23   |   (0) comments


    Top German soccer club FC Schalke 04 has deployed a new, agile WiFi network from Huawei in its Veltins-Arena stadium and is reaping the benefits in terms of customer satisfaction and business opportunities, explains marketing chief Alexander Jobst.
    LRTV Huawei Video Resource Center
    Huawei’s Insights on Mobile Video

    3|24|15   |   7:51   |   (0) comments


    More people than ever are now watching videos on smartphones. Seventy percent of mobile traffic will be video traffic until 2018. In this video, Huawei's exports give their insights on mobile video in terms of business model, network planning and 4G network construction.
    LRTV Documentaries
    The Rise of Industry 4.0

    3|24|15   |   02:26   |   (8) comments


    Are you ready for the fourth industrial revolution? It's a big deal for influential operators such as Deutsche Telekom.
    LRTV Huawei Video Resource Center
    Getting Connected With eLTE

    3|23|15   |   06:04   |   (0) comments


    Trunked radio communications have entered the 4G LTE world, and with Huawei's eLTE solution, can now deliver a full range of data and video services as well as push-to-talk voice, explains Huawei's Norman Frisch.
    LRTV Huawei Video Resource Center
    Funkwerk’s on Track With Huawei

    3|19|15   |   3:23   |   (0) comments


    GSM-R technology specialist Funkwerk and Huawei have forged a partnership that is benefiting both parties, notes Funkwerk's Gottfried Winter.
    LRTV Documentaries
    How EANTC Tested Cisco's Virtualization Solutions

    3|18|15   |   5:49   |   (0) comments


    Carsten Rossenhövel, managing director of independent test lab EANTC, tells Light Reading founder and CEO Steve Saunders about the innovative approach his team had to take when validating Cisco's service provider virtualization and cloud solutions.
    LRTV Huawei Video Resource Center
    Converged Communications: Working Simply & Smartly

    3|17|15   |   03.24   |   (0) comments


    Edwin Diender, CTO of Huawei's Enterprise Switch & Communications division, outlines the four main pillars of Huawei's unified communications portfolio and explains how the addition of 4K video capabilities has helped Huawei develop a groundbreaking videoconferencing solution.
    Upcoming Live Events
    April 14, 2015, The Westin Times Square, New York City, NY
    May 5, 2015, Hyatt McCormick Place, Chicago, IL
    May 6, 2015, Georgia World Congress, Atlanta, GA
    May 12, 2015, Grand Hyatt, Denver, CO
    May 13-14, 2015, The Westin Peachtree, Atlanta, GA
    June 8, 2015, Chicago, IL
    June 9-10, 2015, Chicago, IL
    June 9, 2015, Chicago, IL
    June 10, 2015, Chicago, IL
    All Upcoming Live Events
    Infographics
    Hot Topics
    Women in Tech Coming Into Focus
    Sarah Thomas, Editorial Operations Director, 3/20/2015
    Will Open Source Groups Keep Windows Open?
    Carol Wilson, Editor-at-large, 3/20/2015
    Google Hires Wall Street's Most Influential Woman as CFO
    Dan Jones, Mobile Editor, 3/24/2015
    The Rise of Industry 4.0
    Ray Le Maistre, Editor-in-chief, 3/24/2015
    Net Neutrality Suits: Only The Beginning?
    Alan Breznick, Cable/Video Practice Leader, 3/24/2015
    Like Us on Facebook
    Twitter Feed
    Webinar Archive
    BETWEEN THE CEOs - Executive Interviews
    LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures.
    Chattanooga’s EPB publicly owned utility comms company has become a poster child for how to enable a local economy using next-gen networking technology. Steve Saunders, Founder of Light Reading, sits down with Harold DePriest, president and CEO of EPB, to learn how EPB is bringing big time tech to small town America.
    Cats with Phones
    Interspecies Phone Love Click Here
    "No, you hang up."
    "No, YOU hang up."