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Cisco Set-Top Plant Is for Sale

Jeff Baumgartner
7/11/2011
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Cisco Systems Inc. (Nasdaq: CSCO) is in the process of selling off its set-top manufacturing facility in Juarez, Mexico, as the company seeks out ways to cut $1 billion in expenses during its current fiscal year, sources tell Light Reading Cable.

Cisco is eager to outsource set-top manufacturing so it can improve its ability to manage costs. A number of employees from the unit formerly known as Scientific Atlanta have been urging Cisco to hold on to it, but the argument apparently fell flat when the unit missed its numbers on product costs and margins.

It's believed that the STB-manufacturing unit is currently mired in relatively fixed costs, and Cisco now believes it can turn those into more flexible, variable costs by outsourcing box manufacturing to others as it's doing now with its routers and other equipment.

It is not yet known what companies might be interested in purchasing Cisco's set-top facilities. Cisco won't comment on this story.

A rare divestiture?
A sale of the Mexico facility would mark Cisco's second divestiture. The first divestiture came in February, when Cisco sold Fibercore, a U.K.-based maker of specialty optical fibers, to H.I.G. Capital Europe. That was another part of Cisco's original Scientific Atlanta purchase. (See Cisco Cuts Some Fiber From Its Diet.)

The question remains: Is Cisco just getting out of set-top manufacturing or is it trying to shed all of what used to be Scientific Atlanta? Our sources are split on Cisco's overall intent. One source says the facility sale will help Cisco prep the rest of Scientific Atlanta for divestiture. Another says Cisco hasn't said it will sell any of its core businesses, including the whole of Scientific Atlanta, which also makes cable modems, voice modems, cable modem termination systems (CMTSs) and other transport access gear. (See Cisco's Cable Crunch and The Disappearing Set-Top .)

— Jeff Baumgartner, Site Editor, Light Reading Cable

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Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Sabre
12/5/2012 | 4:59:45 PM
re: Cisco Set-Top Plant Is for Sale


I haven't seen a list of who's taken a look at Cisco's set-top-making facility, but one source says Samsung has at least kicked the tires in recent weeks.  Not sure if there's a direct correlation here, but Samsung has been making progress with its US set-top ambitions, getting in at Cablevision, TW Cable and Bright House. 


Also, Samsung's been forcing Cisco to drop its STB prices, but Cisco's plant has not helped it cut costs/margins, so I'm not sure I see exactly *why* Samsung would be interested in the Juarez facility. JB

ethertype
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ethertype,
User Rank: Light Sabre
12/5/2012 | 4:59:41 PM
re: Cisco Set-Top Plant Is for Sale


OK, so that's a little harsh, but owning STB manufacturing was never a good fit for Cisco's manufacturing model.  That Cisco kept it for a while after the SA acquisition was just one of many temporary concessions to avoid upsetting the apple cart, not a permanent change in strategy.  Now as traditional STBs are looking more and more like yesterday's business, it makes even less sense to keep the manufacturing assets on the books.

pnni-1
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pnni-1,
User Rank: Moderator
12/5/2012 | 4:59:40 PM
re: Cisco Set-Top Plant Is for Sale


Possibly Foxconn? ;)

btierney
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btierney,
User Rank: Light Beer
12/5/2012 | 4:59:38 PM
re: Cisco Set-Top Plant Is for Sale


people, they are selling the factory to a 3rd party but will keep on using it.  strickly a financial deal.  the people will still go to their jobs but instead of working for cisco will work for the 3rd party....no big deal...suprised this didn't happen years ago.


 


the real issue, IMHO, is the entire Scientific Atlanta deal was a screw up from the get go.  SA wasn't a real company they were a contract design house for the US cable industry. 

^Eagle^
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^Eagle^,
User Rank: Light Beer
12/5/2012 | 4:59:37 PM
re: Cisco Set-Top Plant Is for Sale


Capers, you state in your post: "no big deal".  I think it might be a big deal for the workers at that plant.  "Spinning" out the facility to another entity gives a bad deal to workers.  This will allow wages to be depressed, benefits to be slashed, stock options to be washed out (as real employees of Cisco, the factory staff is treated reasonably well and has some benefits), etc.


So, while clear it is purely a financial move, I think it is a big deal to the employees there.


sailboat

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Sabre
12/5/2012 | 4:59:34 PM
re: Cisco Set-Top Plant Is for Sale


Interesting. If they take that type of an approach -- sell to third party but still use it and try to squeeze costs  -- i'd have to think that it would take Samsung from the equation as a leading suitor. JB

btierney
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btierney,
User Rank: Light Beer
12/5/2012 | 4:59:34 PM
re: Cisco Set-Top Plant Is for Sale


My take, is they leave the factor one day as Cisco employees and show up the next day as employees of the contract manufacturer.  I would hope the new company treats them well.


 


How many SA employees made money of options in the last five years.  Probably only the top tier of incompetent execs.

comtech3
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comtech3,
User Rank: Light Sabre
12/5/2012 | 4:59:24 PM
re: Cisco Set-Top Plant Is for Sale


I've been in the cable business for years,and let me tell you, SA set-top boxes and cable modems are the worse from any manufacturer! And if you think those are bad, try their multimedia adapters. The cursed phone modem takes forever to register with the CMTS,and within a few days calls cannot be made with them.


However, the SA gears used in the plant are excellent and more user friendly to line technicians than Motorola's.

Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 4:58:52 PM
re: Cisco Set-Top Plant Is for Sale


Nice call!

pnni-1
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pnni-1,
User Rank: Moderator
12/5/2012 | 4:58:52 PM
re: Cisco Set-Top Plant Is for Sale


Winner winner chicken dinner!! 


http://www.marketwatch.com/sto...


 

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