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Wednesday, November 26, 2014

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  • Cisco Feels Pain of Shifting Set-Top Box Landscape

    This week technology giant Cisco reported its fiscal Q2 earnings and once again sales of its set-top boxes to big pay-TV operators were a glaring weak spot. This business has practically gone off a cliff, falling 29% from last year's similar quarter, a loss which followed a 40% decline in North America set-top sales for the prior quarter. While Cisco tried to put a positive spin on things by pointing to stronger sales of its IP-enabled set-tops and international results, the problems reflect a significant shift in how pay-TV operators view set-top boxes in a larger IP-related context, trends which are likely to only accelerate going forward.

    Cisco's set-top business consists mainly of Scientific-Atlanta, one part of the North American duopoly (with Motorola) that has existed for years. Cisco has done very well with this business since it was acquired back in 2005. However, big pay-TV operators have more recently sought to cut back their capex spending on set-tops, seeking out lower cost, more flexible alternatives. Some operators like Comcast and Time Warner Cable have even begun signaling an interest in possibly eliminating set-tops from their video delivery architecture as evidenced by recent deals with Samsung and Sony connected TVs. Meanwhile inexpensive devices from Roku and others could function well as 2nd and 3rd room replacement boxes, to be funded by consumers instead of operators. Add it all up and it poses a very challenging landscape for beleaguered Cisco.