Cisco Acquires Erstwhile Partner DiviTech to Orchestrate Digital Video Service Management

| Jun 12, 2008 | Digital Media Infrastructure | Competitive Update

| Analyst: Yoav Schreiber

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

June 10, 2008 – Cisco announced its intention to purchase DiviTech, a provider of digital-service management (DSM) technologies based in Denmark. DiviTech's DSM solution, which will be integrated into Cisco’s ROSA network and element management system, offers media broadcasters, cable and Internet Protocol Television (IPTV) service providers an intuitive interface for creating, modifying and managing video networks. Financial terms of the transaction are undisclosed, and is expected to close in the fourth quarter of Cisco’s fiscal 2008.

Analytical Summary

• Current Perspective: Positive on Cisco’s agreement to purchase DiviTech, because it will enable Cisco to extend the end-to-end value proposition of its ROSA headend management system byadding video services layer management to its element and network management solution. As advanced video services gain traction, including the delivery of on-demand services, high definition content, and the support of multiple codecs (i.e., MPEG-2/4), the underlying video networking platform becomes increasingly complex to manage. By integrating DiviTech’s HEMS platform, Cisco can offer broadcasters, cable and IPTV providers with a flexible, services oriented management solution that reduces video headend management complexity, improves operating efficiencies, maximizes bandwidth utilization, accelerates service introduction, and maintains service quality and availability.

• Vendor Importance: High to Cisco, as the company needed to enhance its video network management capabilities, (i.e., ROSA) gained via the 2006 Scientific Atlanta acquisition, with a video services-layer orchestration solution. The DiviTech acquisition proves that Cisco is successfully extending the ROSA platform, enhancing the “define the experience” element of Cisco’s video networking solution, and enables Cisco to make further inroads into the IPTV market. Further, the acquisition also locks away this key technology from rivals (i.e., BigBand, Harmonic, Ericsson, and Motorola) that also relied upon DiviTech (as a partner) for enhancing their video network management platforms.

• Market Impact: High on the overall digital media infrastructure market, because Cisco’s commanding position as a nend-to-end solution provider across cable, satellite and telco IPTV markets compels rivals to effectively respond with bolstered marketing messages as well as seek new technology partnerships. While rivals certainly possess their own video network management solutions, with comparable service layer management capabilities, by lacking Cisco’s end-to-end value proposition (encapsulated in the company’s “define-preserve-realize” elements of the video experience) they remain susceptible to Cisco gaining a market positioning advantage via the acquisition of this enabling technology.

Recommended Competitor Actions

i• Major digital media/IPTV solution rivals such as Ericsson, Motorola, Alcatel-Lucent, Nokia Siemens Networks, Thomson, and UTStarcom need to continue challenging Cisco’s ability to further influence major IPTV deployments. This is due to factors such as Cisco’s relatively limited hand in current IPTV deployments, as well as in key telco infrastructure areas such as broadband (copper) access and mobile infrastructure, which can play an increasingly vital role in the overall integration and scaling of multi-play services that leverage IPTV.

• IPTV headend rivals such as Motorola, Ericsson, Harmonic, Envivio and UTStarcom should continue touting theirjump start in penetrating the still budding IPTV headend segment at Cisco’s expense. This is despite Cisco’s Scientific-Atlanta headend (HE) assets within the cable space and presence within the AT&T and SESAMERICOM HEs, which suggests scaling IPTV HEs is a different ballgame altogether.

• Rivals such as BigBand, Ericsson, and Harmonic should also point to their existing video service management solutions and market credibility that can challenge Cisco and its acquired DiviTech capabilities. For instance, Harmonic’s NMX DigitalService Manager, in addition to its service orchestration and intuitive UI that can match DiviTech, also possesses scalability, availability and digital program insertion support that leverages Harmonic’s technology and market validated architecture.

• Similarly, Ericsson can leverage its nCompass Controland Monitoring platforms and MediaPath Asset Management System, proven in over 2,000 cable, satellite and telco accounts, which tap into TANDBERG TV’s extensive experience aligning video management platforms with operator business and back office requirements. For instance, by extending its video management capabilities to flexibly monitor multi-vendor and multi-site video networking implementations, TANDBERG TV streamlines and automates the process for receiving, staging, and propagating on-demand content – offering cable, telco, and satellite service providers lower operating costs in areas such as content and metadata management.

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