Never Mind! Cisco Still Totally Hearts Set-Top Boxes.
Someone certainly wants the world to believe that Cisco Systems is getting out of the business of selling TV set-top boxes and spent what appears to have been a busy weekend telling reporters that it’s happening.
How then to explain Cisco’s strong denials of an interest in selling — and its reaffirmation of love for — the set-top box business it got as part of its $7 billion acquisition of Scientific Atlanta six years ago?
To be clear, Cisco is no longer in the business of actually making these boxes. It unloaded the Mexico-based manufacturing portion of the business to Taiwan’s manufacturing giant Foxconn as part of its sweeping reorganization last year.
This is a familiar rumor that crops up from time to time. The last time was in the fall, and the source was a speculative report in the Atlanta Business Chronicle.
Typically, companies can ignore this type of chatter and dismiss it with the standard “no comment on rumor and speculation.” But seeing how this is the kind of rumor and speculation that often turns out to be true, and as such has a way of sapping the morale of otherwise productive employees, Cisco sought to get in front of it by professing its love for its set-top box unit in a statement to Light Reading.
CEO John Chambers recently stressed his commitment to set-top boxes even as the business dragged down Cisco’s overall gross margins. Analyst Sanjiv Wadhwani of Stifel Nicolaus estimates that Cisco’s gross margins on set-tops are in the mid 30 percent range, which is about what you’d expect for competitive hardware of any kind, but it’s also half of what Cisco gets across the rest of its business. As such, a sale would boost Cisco’s gross margin overall by about 1 percent, he said in a note to clients today.
During a conference call to discuss earnings earlier this month, Chambers said Cisco is “very much committed to this marketplace.” The point for sticking with it is to help customers move from old-school set-top boxes to IP-based products like Cisco’s Videoscape, he said. Presumably, the transition work means holding on to the set-top box customers.
But if you’re one of the writers who fell for the latest bit of rumor-mongering — and who doesn’t once in awhile? — you’re probably quoting Emily Litella from 1970s-vintage “Saturday Night Live” and sheepishly saying, “Never mind.”