San José of California, Shanghai and Hong Kong, November 2, 2009, CISCO Systems, Inc. (NASDAQ: CSCO) announced a formal agreement today to acquire the set-top box business of DVN (Holdings) Limited (SEHK: 0500), a company listed in Hong Kong (hereafter referred to as “DVN” for short) with major operations in China mainland and a leading domestic enterprise engaged in digital CATV solutions. Both Parties share the vision to provide individual family with an extensible interactive platform of digital TV with high performance and rich contents in the future.
Under the agreement, CISCO will acquire the set-top box business for less than $44.5 million with $17.5 million to be paid in a lump sum and an additional maximum amount of $27 million to be paid in four-year installments in light of the actual sales performance at different stages in the future. The acquisition is expected to close in the first half of 2010 subject to standard closing conditions, DVN shareholder approval and regulatory approvals.
In addition to the acquisition, CISCO has entered into a go-to-market alliance with the remainder of the DVN, and the remainder of the DVN business will continue to be led by current DVN CEO Terry Lui in order to utilize the company’s middleware and advanced applications as well as integration and support services. The alliance will provide joint customers with unparalleled end-to-end capabilities through the evolution from basic digital broadcast to advanced interactive services.
“CISCO and DVN have similar enterprise cultures that emphasize video innovation and a shared vision that the household multi-media interconnection will be the direction of the future development of digital TV in China,” said Ken Klaer, Vice President and General Manager of International Cable Business Unit at CISCO, “With this acquisition, we will offer customers the powerful combination of DVN’s products with the CISCO IP Next-Generation Network (IP NGN) platform, and CISCO will be well positioned to engage in the largest digital TV transformation and reform in the world today.”
The Chinese cable market is currently the largest in the world with 160 million subscribers and is predicted to grow to as many as 200 million over the next three to five years. Currently, only about one-third of the market has converted to digital cable and its full digitization will be realized by 2015, which creates an important long-term opportunity for CISCO.
“CISCO’s global technology leadership and breadth of services combined with DVN’s market-leading solutions and talented employee base will ensure that Chinese consumers continue to receive superior digital services today and are provided with world-class advanced technologies moving forward. CISCO has demonstrated a strong commitment to the Chinese market, and I look forward to working with them as part of our ongoing alliance,” said DVN CEO Terry Lui.
Between the signing of the agreement and the close of the acquisition, CISCO and DVN’s set-top box businesses will continue to operate as separate companies. Upon completion of the transaction, the DVN set-top box business will become a part of the International Cable Business Unit within the Service Provider Video Technology Group (SPVTG) at CISCO led by Klaer. Under the agreement, the two companies will work together with the aim of providing uninterrupted service to set-top box customers and to prepare for an orderly transfer of the business.
The DVN’s set-top box business has run end to end from within China -- from design, sourcing and logistics through to marketing, sales and service. The acquisition is seen as an important milestone for CISCO, not only in China, but also for a broader strategy toward competing in emerging markets with locally designed and produced solutions.
The investment is part of CISCO’s ongoing long-term commitment to China and its belief in cultivating local innovation and talent. In April of this year, CISCO introduced a “cultivated innovation” model aimed at boosting local innovation through capital, technology, process expertise, incubation resources and leadership investments.
CISCO Profile
http://www.cisco.com
http://www.cisco.com/go/cn/newsroom。
CISCO Systems, Inc. (NASDAQ: CSCO) is a world leading supplier of Internet solutions committed to the improvement of the connection, communication and collaboration manner of people. For more information about CISCO, please visit http://www.cisco.com and http://www.cisco.com/go/cn/newsroom for news related to the company.
DVN (Holdings) Limited
www.dvnholdings.com
www.dvnchina.com.
DVN (Holdings) Limited (SEHK: 0500) is the largest integrator of digital TV and broadcasting systems in China, specialized in the design, development, integration and sales of digital set-top box, smart cards, CAS, digital broadcasting system and relevant software. For more information about DVN, please visit www.dvnholdings.com and www.dvnchina.com.
Forward-looking Statements
This press release may contain “forward-looking statements” as defined by Safe-harbor Provision contained in the Private Securities Litigation Reform Act of 1995, which may include statements regarding the anticipated closing of the acquisition, completion time of the acquisition, prospective return of CISCO and companies concerned after the acquisition, development of relevant markets and the impact of the acquisition on relevant markets, as well as the arrangement of DVN’s employees. Please note that all “forward-looking statements” are only based on the expectations on the acquisition and are subject to various accidents or other unforeseen events that could cause critical changes to differ materially from the “forward-looking statements”, including the placement of DVN’s employees, whether CISCO is able to integrate the set-top box business of DVN and obtain the prospective return, the business and economic status, growth trend in network and relevant fields, changes of the world economic environment and other risks listed in the 10-K Report submitted by CISCO to the U.S. Securities and Exchange Commission on September 11, 2009. All “forward-looking statements” in the press release are based on the limited information provided by CISCO, which may change due to unforeseen events or accidents in the future. CISCO assumes no obligation to update the information, which speaks only as of its dates.
