Anatomy of a US corporate: Acquisition Failure

The first question that entered my mind when Cisco bought NDS for $6bn was Why?

It certainly seemed like a shrewd move by Permira, who had being spinning a refloat rumour for a while.  But what better way to sell off the company than to another company with a lot of cash sitting overseas.  Looking back now it feels a lot like Permira saw Cisco coming.

What did Cisco think they were buying?  To me NDS was a company entirely based around the production of smart cards for digital broadcasters.   A lot of ancillary services existed for other areas of digital broadcasting - but NDS never really made big on this, it was all about enabling the per subscriber sales of smart cards.

That is not to say NDS was not looking at the future and the threat of over the top services taking over in the broadcast world.  They had some niche technologies for OTT playback increasingly in a cloud context, but again nothing big and never going to be what the company was going to make money out of.   They knew they had to adapt to stay relevant to the broadcasters, but were slow in doing so - just because you are too busy keeping what you have now working.

I think Cisco saw the OTT/cloud part of the business as bigger than it really was, and much of their valuation was in thinking it was all ready to deploy when in actual fact it was years away (by which time a more nimble competitor would have done it).

Cisco saw the opportunity to build another service provider business unit this time for video.  The belief being that the reliance on services now turning back to the service provider infrastructure, hardware sales would follow.  But really they ended up taking on a mid size company that was beginning to struggle to stay relevant, and inherited all of its problems rather than the expected cash cow that could serve the corporate giant with easy revenue.