Cisco is shrinking its service provider operations with the sale of its Service Provider Video Software Solutions (SPVSS) business, which is, in effect, the NDS business it acquired in 2012 for $5 billion. (See Permira to Buy Cisco's Service Provider Video Software Solutions Business.)

In a quirky twist of fate, the buyer is private equity firm Permira, which sold NDS to Cisco six years ago. (Permira was a 51% stakeholder in NDS.) (See Cisco Bets $5B More on Video With NDS.)

Cisco Systems Inc. (Nasdaq: CSCO) appears to be selling the business for much less than it paid. Reports from Israel, where NDS was based, suggest a price of US$1 billion, though Permira has told Light Reading that this information is "wrong." The accurate figure is not being disclosed, the private equity firm said.

Permira plans to launch a "new, rebranded company focused on developing and delivering video solutions for the Pay-TV industry" with Dr. Abe Peled, former chairman and CEO of NDS and an adviser to Permira, as its chairman. Peled joined Cisco following the NDS acquisition in 2012 as senior vice president and chief strategist for Cisco's Video and Collaboration Group, but left at the end of 2013.

The new business will be built around Cisco's Infinite Video Platform, cloud digital video recording, video processing, video security, video middleware and associated professional services. (See Cisco's Cloud Video Platform Grows Up and Cisco's Infinite Video Platform.)

Permira deflected questions about the financial performance of the business it is acquiring or how many staff would transfer from Cisco.

The deal is expected to close in the first quarter of Cisco's fiscal year (roughly August-October).

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Cisco had made a big play for the service provider video market in the early part of this decade but as viewing habits changed, shifting more towards OTT video, so Cisco's strategy also shifted: It sold its set-top box unit in 2015 to Technicolor. (See Cisco Sells STB Unit to Technicolor for $604M.)

It's not the only major vendor to have taken a U-turn on the video systems road: Ericsson struck a deal to sell the majority of its media business earlier this year. (See Ericsson Stuck in Loss-Making Rut, Offloads Majority Stake in Media Unit.)

Cisco says it's hanging on to some video technology that is related to its core service provider focus areas.

And as if to allay any concerns that Cisco might be edging away from the telco sector, Cisco CEO Chuck Robbins was quoted in the official announcement as saying: "Service providers remain a key customer segment for Cisco, and we look forward to continuing to partner with them to deliver new revenue-generating services and experiences."

To back that up, Yvette Kanouff, senior vice president and general manager of Cisco's Service Provider Business, noted in a corporate blog about the sale of the SPVSS business: "Cisco's strategy is focusing on our five key areas of networking, multi-cloud, security, data, and collaboration. Given this strategic direction, it is the right time for the SP video group to be a standalone company. I believe it will be very successful, and it will be focused solely on growth in this marketplace."

She added that this "is a good day for the Service Provider video business, for our SPVSS employees, for our customers, and for Cisco." The employees might, or might not, agree, depending on what happens to them. For Cisco, the positive might be that a non-core asset is off the books, but investors might ask questions about the undisclosed financial details.

— Ray Le Maistre, Editor-in-Chief, Light Reading