For more than, it has successfully used acquisitions, both large and small, to enter new markets and round out its product portfolios. With more than 100 purchases under its belt, the company shows no signs of slowing down as it prepares to take its .
Dan Scheinman, Cisco's senior vice president of Corporate Development, is responsible for 370 Cisco employees--40 of whom exclusively scope out hot acquisitions and investments. He considers one of his signature moments as Cisco's acquisition guru to be the, the cornerstone of Cisco's consumer business. He considers another to be the , which is expected to close later this month.
CNET News.com sat down with the man behind Cisco's aggressive acquisition strategy to talk about what's ahead for the company.
Q: There's been a lot of talk recently about Cisco's plans to enter the consumer electronics market. Can you explain the strategy?
Scheinman: We think that at a very, very high level there's a disruption occurring in the networking and film industries. First, service providers are rushing to build more bandwidth into their networks, because they need to deliver services in order to compete with each other. Cable has to compete with satellite, and the telephone companies have to compete with cable. So, globally you see a rush to extend higher bandwidth pipes into consumers' homes.
The second part of this is that you're also seeing the content companies looking for new distribution channels. There's been slowing growth in DVD and box office sales. Content providers want to be able to reach consumers directly, which is a real evolution for the content companies.
The third thing is you're also seeing the rise of the empowered consumer with new devices in the home. Consumers want the ability to get the content they want, where they want it, on any device they want it on. This is a real change.
We think these three things will lead to a lot of opportunity for new devices and big opportunities for improving the network. And we think we have strengths both in making devices and developing technology for the network.Recently, Cisco joined Disney and Intel in investing in the relaunch of video-on-demand service MovieBeam. How exactly does a service like MovieBeam fit into Cisco's consumer and entertainment strategy?
Scheinman: We're trying to make sure that consumers are able to watch TV where they want, when they want, on the device they want, and over the network they choose. That's our vision. Today, if you want to watch a movie, you physically have to go get the DVD to be able to do that. There aren't a lot of legal ways to be able to get recently released movies and watch it on the big screen you want. allows us to connect content to the big screen. And this is the first time that Hollywood is really opening this level of content digitally to be connected to TVs. So, it looked very exciting for us.
So what is Cisco's involvement with MovieBeam? Is this just an investment or does Cisco have more of a strategic relationship with it?
Scheinman: We also have a relationship on the device level. Today, the MovieBeam box is a home-grown device. Now, it will be branded Cisco. But ultimately we hope that MovieBeam will be a service that resides on a Cisco box. At the end of the day, Disney and MovieBeam don't really care about making hardware. They are hopeful that we'll do that.
The key for us is that we get access to recently released, first quality movies. And this is one of the only ways to get access to newly released movies legally without buying or renting the physical DVD.
Today, the service is delivered over spectrum via the airwaves. But if the service is successful and expands, we see it migrating to an Internet service. We think we can really add value here. So, we're very excited to be a partner with Disney as it launches the service. And we're excited to be partners with Intel and the other investors.
Cisco is getting ready to close the $6.9 billion acquisition of Scientific-Atlanta in the next few weeks. Can you explain the thought behind that purchase?
Scheinman: Linksys already gave us a gateway into the home through a retail channel, but Scientific-Atlanta gave us a new sales channel into the home through a service provider. Scientific-Atlanta also gave us video expertise. We've been saying for a long time that data, voice and video would ride over one network. We looked at our offering and said, "What are we missing? Video."
So we began to look at what our options were in video. Scientific-Atlanta is a leader, and it became the clear choice for us.
Did you guys ever think of TiVo?
Scheinman: We look at everything. But we can't comment on public companies.
Now that Cisco has Scientific-Atlanta, which gives you a cable set-top box and DVR, and you have Kiss Technologies, which gives you a consumer electronics device in the home, what's next? What is the next hole in the portfolio that needs to be filled?
Scheinman: It's going to be interesting for us is to see where the future takes us. One of the things that we've got to do is scale Scientific-Atlanta to enter the telco TV business in Europe. That's very important for us. I think you're going to see us expanding our European presence. , and they already have hundreds of thousands of users of their device in Europe. That's No. 1. No. 2 depends on what happens in the industry. If takes off, there's going to be a lot of demand for a lot of new stuff.
Whether we move tomorrow or we wait a little bit to see how the market breaks out, it's going to depend. I would say that the thing that I'm really encouraged by is the speed at which all parties are moving. We see cable moving incredibly rapidly to build triple- and quadruple-play services. The phone companies are also moving at light speed. The same kind of thing is going on in Europe. But I think we have a little bit of time to figure out and make sure we know where the gaps are so we can make the right decisions.
As Cisco moves into the consumer market, will the company do more partnerships and investments like the MovieBeam deal or more acquisitions like Kiss or Scientific-Atlanta?
Scheinman: If we are successful, there are going to be some things that you'll see. No. 1 is, you'll see us partner with the content industry. And I mean that very broadly, so it could mean a deal with someone like Comcast for example, which has a lot of its own content.
No. 2 is we'd like to be able to work very closely with the service providers to be able to offer differentiated offerings. You're going to see us get engaged with trying to help our service provider partners deliver new services to their customers.
No. 3 is, you will see us be aggressive and make acquisitions in terms of what's next. There are no obvious large targets today, but I think there's a lot in the start-up world that looks exciting to us. And you may also see us develop partnerships in Europe that will help Scientific-Atlanta scale its business there.
How much of your team's time is spent looking at acquisitions in the consumer part of the business and how much is spent looking for deals in other parts of Cisco's business?
Scheinman: I would say that right now we are spending about a third of our time either looking at investments, acquisitions or partnerships in the consumer or service provider space.
What about the other two-thirds?
Scheinman: There's a lot going on in the enterprise with the virtualizations of the data center. We're also looking at our existing businesses and how they can grow. And there's the small and medium business market, which we call commercial. That is very exciting, too.