Cisco Systems buying Scientific-Atlanta for about $6.9 billion

Friday, November 18th 2005, 8:30 am
By: News On 6

NEW YORK (AP) _ Cisco Systems Inc., the world's largest network equipment maker, said Friday it agreed to acquire cable-television technology company Scientific-Atlanta Inc. for about $6.9 billion.

Cisco is paying $43 a share for Scientific-Atlanta, one of the largest makers of set-top boxes for television programs and movies-on-demand. That is a 3.7 percent premium over its closing price on Thursday.

Scientific-Atlanta shares rose $1, or 2.4 percent, to $42.45 in premarket trading Friday while Cisco shares slipped 12 cents to $17.25.

The agreement includes outstanding options, for a total purchase price of about $6.9 billion.

``Video is emerging as the key strategic application in the service provider triple play bundle of consumer entertainment, communication and online services,'' said John Chambers, Cisco president and chief executive, in a statement. ``The addition of Scientific-Atlanta further extends Cisco's commitment to and leadership in the service provider market.''

Cisco said Scientific-Atlanta will become a division of its routing and service provider technology group, led by Cisco Senior Vice President Mike Volpi.

The deal, which was approved by the boards of both companies, is expected to close in the third quarter of Cisco's fiscal 2006 calendar, pending closing conditions.

San Jose, Calif.-based Cisco said it expects the deal to be neutral to its fiscal 2006 earnings, while slightly boosting its fiscal 2007 profit before items. Cisco said it will finance the transaction with cash and debt.

Analysts expect Cisco to earn $1.03 per share for fiscal 2006, and $1.18 per share for fiscal 2007, according to a Thomson Financial survey.

Lawrenceville, Ga.-based Scientific-Atlanta said last month that its fiscal first-quarter profit grew 9 percent to $60.7 million, but sales of $490 million fell shy of Wall Street's expectations.

Earlier this month, Cisco said its fiscal first-quarter profit slipped as it expensed employee stock options for the first time and the company predicted weaker-than-expected sales. The company has its core business of routers and switches that direct data traffic over the Internet as well as its advanced technologies such as storage, wireless and security products.

Cisco has been working on a half dozen, so-called advanced technologies that enhance its routers and switches. It's betting the technologies can each generate revenue of $1 billion or more each year. Cisco also plans to announce additional advanced technologies before the end of calendar 2005.