Light Reading

Ex-Cisco Execs Form Cable Set-Top Startup

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
6/1/2012
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Some former Cisco Systems Inc. (Nasdaq: CSCO) and Scientific-Atlanta employees have gotten the band back together to create iNovo Broadband Inc. , a startup angling to become a new source for cable set-tops, cable modems and other consumer premises equipment (CPE).

If operators buy in, iNovo would set the stage for fresh competition against cable's incumbent set-top suppliers, especially Cisco, Motorola Mobility LLC and Pace plc .

A startup's lower overhead and lack of an installed base will let Duluth., Ga.-based iNovo provide CPE gear "at a very competitive price," said CEO Jack Miller, during an interview at The Cable Show last week in Boston.

Miller worked for Scientific-Atlanta for nine years before starting N2 Broadband, a video-on-demand (VoD) backoffice vendor that was sold to Tandberg Television in 2004 for $118 million and is now part of Ericsson AB (Nasdaq: ERIC)'s video product lineup. He and Himanshu Parikh, iNovo's CTO and a former VP and GM at Cisco/Scientific-Atlanta, are the principal founders of iNovo, and they began assembling their team about a year ago.

Most of the iNovo team also hailed from Cisco/Scientific-Atlanta and is comprised of cable vets who have not just designed, managed and sold cable CPE, but have also managed relationships with manufacturers such as Foxconn Electronics Inc. , Askey Inc. and Unihan Corp.

Ajith Nair, iNovo's VP of engineering, helped develop SA's first set-top box and was the main hardware architect for eight generations of boxes. Doug Woodhead, the company's principal engineer, directed the ASIC development group at Cisco/S-A. And Benny Hsu, iNovo VP of manufacturing partners, once managed the offshore, high volume manufacturing relationships for Cisco's home networking business unit.

"We have all the disciplines and experience needed to compete in the CPE business," Miller said.

Shaking things up
iNovo arrives amid a cable set-top shakeup. Google (Nasdaq: GOOG) acquired Motorola Mobility, and Panasonic Corp. (NYSE: PC) recently exited the domestic cable set-top business. Cisco recently sold its set-top box factory to Foxconn but keeps saying that it remains fully committed to the set-top box market. (See Google Closes $12.5B Motorola Deal , Will Moto Go Back to the Future?, Foxconn Buys Cisco's Set-Top Factory , Panasonic Exits US Cable Set-Top Biz and Why Cisco Wants Out of Set-Tops (Or Not).)

"There's a lot of turmoil in the market," Miller said, and iNovo took advantage of it as Cisco scaled back its operations on Sugarloaf Parkway in Lawrenceville, Ga. "There were some very good people available."

Miller thinks iNovo has the institutional knowledge and technical know-how to take MSO-defined CPE specifications through the hardware integration and building phases by shepherding that work through the manufacturers -- expertise that cable operators don't have.

iNovo got off the ground last November, has already shipped one product to a customer for evaluation and hopes to notch its first deployment deals before the end of 2012, Miller said. He's mum on which product is being evaluated, but the company lists a sizable lineup of CPE categories it's pursuing, including standard- and high-def digital transport adapters (DTA), IP-based set-tops, Docsis modems and gateways, and indoor and outdoor Wi-Fi access points.

The company has raised more than $1.5 million in seed financing and has begun to pursue an "A" round targeting about $10 million.

iNovo is also looking for "strategic investment from MSOs," Miller said. That's a path he's travelled before. Time Warner Cable Inc. (NYSE: TWC) participated in N2 Broadband's A round and deployed N2's OpenStream, a VoD backoffice system that let operators use video pumps from multiple vendors and played a big role in dropping costs to about $100 per stream from $300 in less than three years.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:31:23 PM
re: Ex-Cisco Execs Form Cable Set-Top Startup


I certainly appreciate iNovo's credentials, but... weren't set-top boxes supposed to go away?


I'm only half kidding. These guys sound capable of doing good stuff, but this could also be a recipe for a commodity-box contender.

AESerm
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AESerm,
User Rank: Light Beer
12/5/2012 | 5:31:21 PM
re: Ex-Cisco Execs Form Cable Set-Top Startup


And margins here will, of course, be thinner than in a software-centric business like n2Broadband.

gconnery
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gconnery,
User Rank: Light Sabre
12/5/2012 | 5:31:20 PM
re: Ex-Cisco Execs Form Cable Set-Top Startup


Yeah, I don't get why somebody would enter this business now.  The business is already in decline as margins have been reduced to nothing even for the major players.  Samsung has a chance because they're fully integrated, but these guys are either going to have to use commodity silicon (at high prices because of their low volume) or develop their own ASIC (on $1.5M... hah, they'll be out of business before they get it done, VCs don't have the stomach for ASIC development anymore) which will take forever.


And the whole innovation thing?  Please, Motorola and Cisco had lots of good ideas for innovations.  But the cable companies don't want any of that.  They want the cheapest possible set top and they want it to be a commodity at multiple vendors built to THEIR specifications.


These guys are going to have their heads handed to them.

Soupafly
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Soupafly,
User Rank: Light Sabre
12/5/2012 | 5:31:18 PM
re: Ex-Cisco Execs Form Cable Set-Top Startup


I think your all missing the point.


These guys are using a "virtual company" model to create a set of competitive platforms. They are not saying they are going to build silicon themselves or design and build a ene-to-end integrated platform including components.


It seems from the piece and quick read of the website that they are going to work with the chinese & global ODM/OEM and Silicon communities to define, spec, manufacture & build a box thats targetted & relevant to the MSO community.


My Impression of the Key ingredients they offer are;


1) Expertise in "anchor customer" acquisition & execution.


2) Platform depth & breadth encompassing the silicon, hardware & software layer reqs.


3) Domain Expertise; These guys KNOW this industry. They have contacts & credibility to burn.


My key concern is whether they can consistently add value over various generations of their platform?


Fail to do that and what you guys predict will happen quickly. They will enter a battle to the bottom "war" of attrition. Very few exit such battles, fewer still with no bruising.


OR; They could be planning to exit the business by that point, hence the VC cash for a spin-out / in vehicle to a vertical or horizontal integration player.


Time will tell...


SF

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:31:13 PM
re: Ex-Cisco Execs Form Cable Set-Top Startup


Although iNovo has someone in-house with lots of ASIC expertise, I didn't get the impression that they'll be making chips, particularly now that cable's got a variety of sources now for those components, including Broadcom, Marvell, Entropic (thanks to the purchase of Trident's assets), and Sigma Designs, to name just a few. But it will be interesting to see if they can indeed bring these MSO-specified products to market for less than the incumbent suppliers. It stands to alter the business model a bit if they can pull it off. And while the long-term of the STB is in doubt as more of that functionality becomes virtual inside connected devices, i still think the death of the STB is still a ways out.  The nearer term question is whether suppliers like Cisco and Motorola really want to stick it out in that market, or if the market conditions make this a great opportunity for a much smaller company like iNovo, with the relationships and the know-how,  to step in and be successful. JB


 

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