Cisco to buy digital video firm Inlet for $95 million
(Reuters) - Network equipment maker Cisco Systems Inc plans to buy privately-held, digital video technology firm Inlet Technologies for $95 million, continuing to expand beyond its traditional routing and switching business.
Context & Ripple Effects
Cisco has been assembling a video business piece by piece: last August it agreed to acquire venture-backed ExtendMedia to build out IP video services, and its own Visual Networking Index forecasts mobile data traffic growing 26-fold to 75 exabytes annually by 2015. Inlet Technologies, a private digital-video firm bought for $95 million, slots into that same build-out.
The deal also sits inside a wider diversification push beyond routing and switching — Cisco has launched the Quad business social network and fields the Flip camcorder line, which reviewers have been testing against the iPhone 4 as a possible casualty of converged devices.
First-order effects
- Cisco adds Inlet's adaptive-streaming technology to an IP video portfolio it began building with the ExtendMedia deal, giving service-provider customers video delivery software alongside Cisco's transport gear.
- Inlet's investors and employees get a $95 million exit, while the integration lands on the team Cisco hired ex-Apple chip executive Mark Papermaster to support on switching silicon.
Second-order effects
- Rivals in IP video delivery now face Cisco bundling video software with its installed base of routers and switches, pushing competitors toward their own software acquisitions or partnerships rather than hardware-only pitches.
- Content owners evaluating streaming platforms gain one fewer independent vendor as Cisco consolidates encoding-and-delivery tooling under a single roof.
Third-order effects
- If the tuck-in cadence holds, network equipment makers keep converting themselves into video-infrastructure suppliers, with acquisition spend tracking the traffic growth Cisco itself forecasts — a pattern that concentrates the video stack in a handful of platform vendors.
- The breadth of Cisco's bets (enterprise social software, consumer cameras, carrier video) raises the structural question of whether diversification dilutes focus or compounds it as traffic scales.
The trend: Networking vendors are buying video-software capability outright so they can capture value at the application layer of the traffic growth their own equipment carries.