Cisco Systems Inc. (Nasdaq: CSCO) enters the IPTV customer premises equipment (CPE) business with its acquisition of the Scandinavian company KiSS Technology Inc. Cisco will pay approximately $61 million in cash and stock for the 65-person company (see IPTV Alters Network Landscape).

KiSS, from the same part of the world that brought us IKEA, manufactures networked DVD players and recorders.

The acquisition is expected to close in early 2006, barring any interference from guitarist Ace Freely or drummer Peter Criss.

KiSS will help Cisco evolve its Linksys portfolio toward more sophisticated multimedia devices that can handle multiple wireline and wireless connections, as well as manage downloaded and streaming entertainment (see Cisco Wins at Video Networks).

Here’s the marketing come-on for KiSS products at the company’s Website (best enjoyed when read in a non-specific European accent):

While Linksys already plays in the data and VOIP CPE market, the KiSS acquisition facilitates its movement into the consumer video market (see Linksys, Vonage Partner on VOIP and LR Poll: Cisco Likely to Make VOIP Buy).

Some of KiSS’s devices integrate an Ethernet connection and can decode MPEG-4 video streams. That decoding function, and the chipset needed to do it, is the main ingredient in IPTV set-top boxes. The company lists as a partner Sigma Designs, one of a handful of companies supplying chip sets for IPTV set-top boxes.

But the KiSS technology will be used for more than just a consumer offering (see IPTV Alters Network Landscape). A Cisco spokeswoman confirms the company will use the technology to attract the business of network operators, including large telcos, wishing to offer IP video services. Linksys co-founder and SVP of marketing Janie Tsao heads up a new Linksys division specifically charged with attracting service provider business (see Cisco Elevates Giancarlo).

The Cisco spokeswoman adds that Cisco already has been working with IP video content providers for some time on distribution issues -- another clue to Cisco’s IPTV aspirations (see IPTV Security: Content Is King). Like Sun Microsystems Inc. (Nasdaq: SUNW), IBM Corp. (NYSE: IBM), and Hewlett-Packard Co. (NYSE: HPQ), Cisco likely is putting together an end-to-end IPTV solution (see IPTV Alters Network Landscape and Sun Shines on IPTV).

This may be a good thing for some large carriers, which are committed to rolling out IPTV and may be in need of technology partners with the credibility and resources that Cisco offers (see SBC Selects Microsoft for IPTV).

— Mark Sullivan, Reporter, Light Reading