Consumer electronics types such as Sony Corp. (NYSE: SNE) were the favorites, and Alcatel (NYSE: ALA; Paris: CGEP:PA) got a mention as possibly looking to defend its turf against Cisco. And there's been talk that at least a couple of these parties were prepared to bid more than Cisco. (See Scientific-Atlanta: Cisco's Sweet Deal?)
But how about Microsoft Corp. (Nasdaq: MSFT)? The New York Post reported early this week that the Redmond empire was mulling its own bid for Scientific-Atlanta.
The theory is attractive, because Microsoft wants the PC (or maybe the Xbox) to dominate the digital home -- and its reign could be threatened if Cisco gets its hands on such a large chunk of the set-top market. Cisco was already headed towards home networking anyway, via the July acquisition of KiSS. (See Cisco KiSSes Up to Telco TV.)
At least one analyst remains unconvinced. In a report issued yesterday, Nikos Theodosopoulos of UBS AG writes that Microsoft has publicly said it would consider "up to $2 billion" in acquisitions per year. Scientific-Atlanta's price tag runs closer to $7 billion.
Moreover, Microsoft wouldn't necessarily want Scientific-Atlanta's infrastructure and systems integration businesses. And because it's peddling IPTV middleware, Microsoft's ownership of Scientific-Atlanta's set-top boxes might create conflicts of interest that could have carriers tuning out. "Both these factors also suggest to us that a bid is unlikely," Theodosopoulos writes.
So, maybe it won't be Microsoft that starts the battle over Scientific-Atlanta. The Cisco acquisition isn't likely to close until after January, so there's plenty of time for someone else to make a bid.
Craig Matsumoto writes: The infrastructure side of Sci-Atlanta seems an awkward fit for Microsoft, it's true. But I do see a major battle ahead between Cisco/Sci-Atlanta and Intel/Microsoft over control of the living room -- fighting over whether the PC or the router runs the show.
Given the market dominance of Motorola in the MSOs with digital set-top boxes (SA is #2), I don't see how they're going to be displaced anytime soon. The encryption scheme is patented and MOT would sue the pants off anybody who created a clone of their set-top box technology. If you consider how well MOT has fared recently in premium cellular phones, you'd think they have a far better understanding of premium consumer electronics than Cisco or Microsoft.
When set-top boxes become open (not any time soon), they'll be reference designs built in Asia with wafer-thin margins. That's not the kind of business that would excite a Cisco or a Microsoft.
The infrastructure side of Sci-Atlanta seems an awkward fit for Microsoft, it's true. But I do see a major battle ahead between Cisco/Sci-Atlanta and Intel/Microsoft over control of the living room -- fighting over whether the PC or the router runs the show.
Or does Sony walk in, with or without Scientific-Atlanta, and take the whole prize?
Why write about this? Because it's what's being talked about out there, and it's a reasonable theory. If we'd written that McDonald's might buy Scientific-Atlanta, then you'd have a reason to complain.
Reporting the buzz is part of our job. If that bothers you, Mr./Ms. Honestly, you're going to have to get all of Wall Street to shut up. Good luck!
Craig, why write about something that is as likely as G.W. Bush becoming a brain surgeon. (The NY Post is kleenex) The UBS guy is right on. MS has to standardize on all set tops with its SW and what would they do with the rest of SA's infrastructure stuff.? Many think Cisco over paid, that SA will further erode margins and is not much more than a value play, not a growth play for John. Face it Cisco, your growth days are way over no matter what you say on analyst day. Live with the fact you u will trade between $16 and $20 If you make you plan.
The blogs and comments are the opinions only of the writers and do not reflect the views of Light Reading. They are no substitute for your own research and should not be relied upon for trading or any other purpose.
To save this item to your list of favorite Light Reading content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Digg
Del.icio.us
Reddit
