- Cisco finally has a buyer for its service provider video business, a unit that has struggled over the years.
- It is selling the unit to back to the same private equity firm Permira, who will spin it out as its own company. It's CEO will be Dr. Abe Peled, who was the former CEO of NDS.
- Peled and Permira got a great deal, too, according to reports.
- This sale piggybacks on other moves CEO Chuck Robbins has made to change Cisco's strategy and direction.
Cisco announced on Tuesday that it finally has a buyer for its service provider video business - a unit that has struggled over the years as the cable industry has been upended by cord cutters and streaming services.
Cisco came into this business in 2012, when it acquired an Israeli company called NDS for $5 billion from the private equity firm Permira. That was one of its largest acquisitions under previous CEO John Chambers.
It is now selling the unit to back to the very same Permira, who will spin it out as its own company, to be led by Dr. Abe Peled as CEO. Dr. Peled was the former CEO of NDS.
Essentially, the old gang bought their company back from Cisco.
And they got a smoking good deal, too, according to some reports. Although Cisco did not disclose financial terms, Permira is reportedly paying about $1 billion, according to Israeli business news site Globes. Other sources told TechCrunch's Ingrid Lunden that they are paying way less than that. Cisco declined our request for comment.
Although Cisco is selling off the unit's products and customers, Cisco is retaining a lot of the intellectual property for sending video across networks. Much of that development happened while the unit was part of Cisco.
This is part of CEO Chuck Robbins' massive about-face, as he shifts the company's strategy away from that of Chambers. He began this change of direction in 2015 when one of his first orders of business was to sell Cisco's TV set-top business to Technicolor for $600 million, a business it had bought for $6.9 billion.
Cisco spent years doing market research surveys, known as the Visual Networking Index, to show potential service provider customers how video was going become a bigger and bigger part of the data on their networks. The subtext was that the world needed to buy new networking equipment from Cisco to handle the video.
And while it is true that video has taken the world by storm, Cisco's vision for the future of online video never really caught on. The company had speculated on developments like streaming social media on the TV alongside TV shows (so people can post while a show airs), or ways to serve up ads that allow people to click and buy the products immediately, as the commercial airs.
Such ideas have not taken off, as people watch less shows and movies on their TVs, and more on their phones and tablets. And for immediate online shopping, the Amazon Echo and Google Home are starting to provide a sense of how that will play out.
And so, in 2017, the service provider video business had shrunk so much that when Cisco restructured itself, it got tossed into the "Other Products" category along with some unnamed "various emerging technologies." Other Products was down 19% year-over-year in Cisco's fiscal year 2017 and down another 13% year over year so far for FY18, Cisco said.
Cisco has reportedly been looking for a buyer for this business since October, Bloomberg reported at the time.
In the meantime, Cisco is still hot on the trail pursuing Robbins' new strategy, which revolves around cloud, collaboration and software subscription services.
Also on Tuesday, it announced that it had acquired hot Silicon Valley AI startup, Accompany. Accompany provides a database of information on executives that helps you beef up on people before you meet them. It was named to Business Insider's 50 startups that will boom in 2018.
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