UPDATE: Cisco Plans To Acquire NDS Group In $4 Billion Deal
March 15 2012 - 9:46AM
Dow Jones News
Cisco Systems Inc. (CSCO) plans to acquire video software maker
NDS Group Ltd. in a $4 billion deal, a purchase the technology
giant said reflects its increased strategic focus on video.
The takeover of NDS Group, the U.K. provider of equipment to
television service providers like cable and satellite companies, is
a natural extension of Cisco's Scientific Atlanta business and fits
with the company's recent intimations it would become more
acquisitive, analysts say.
The deal, which also includes the assumption of nearly $1
billion of debt, is expected to close in the second half of the
year.
Cisco noted it expects the acquisition will accelerate delivery
of its Videoscape platform. It is expected to expand the tech
giant's capabilities in the service provider market and expanding
its reach into emerging markets, such as China and India. Cisco
also expects the acquisition to add to its adjusted earnings in the
first full year.
The buyout comes as NDS was on course to go public this year.
The company is 51% owned by private-equity firm Permira, with News
Corp. (NWSA)--the owner of Dow Jones--holding the remaining
stake.
Joanna Makris, analyst at Mizuho Securities USA, said the NDS
purchase increases Cisco's exposure to cable-service and other
television providers, rather than the company's traditional focus
on telecommunications providers.
Just as telecommunications providers are increasingly getting
into the television game, Makris noted that "right now there's
convergence going on between the television and PC, and what Cisco
is trying to do is capitalize on that convergence."
Alkesh Shah, analyst at Evercore Partners, noted that as NDS is
primarily a software company, the takeover doesn't raise red flags
about margin degradation for Cisco. It fits with Cisco's search for
high-margin businesses that are international, so the company can
take advantage of its large cash assets sitting offshore.
Cisco Systems last month reported its fiscal second-quarter
earnings rose 43% and gave an upbeat profit forecast as its renewed
focus on networking equipment continued to pay off.
On the conference call for those results, executives noted that
Cisco had a desire to become more acquisitive and seek out bigger
deals.
Cisco shares were down 20 cents at $20 in recent premarket
trading.
-By Joan E. Solsman and Tess Stynes, Dow Jones Newswires;
212-416-2291; joan.solsman@dowjones.com
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