Mergers & acquisitions

Cisco Set-Top Plant Is for Sale

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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