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Analyst: Cisco/S-A combo is the right thing to do

Wed, 11/30/2005 - 5:21am
Jeff Baumgartner, CED

Although some shareholders are fighting the financial terms of the proposed marriage of Cisco Systems and Scientific-Atlanta, at least one analyst sees it as "the right move" for Cisco as the technology behemoth sets its sites on the telco sector.

Strategically, the fusion will create "one-stop shopping" for the converging broadband access and entertainment sectors, noted Detecon Inc., in its summation of the $6.9 billion deal announced earlier this month.

"The acquisition makes sense both tactically and strategically," said Detecon CEO Eckart Pech. The deal, he added, "compensates for Cisco's inability to play a significant role in telco infrastructure build-outs aimed at offering a full portfolio combining voice telephony, video entertainment, high-speed Internet access and wireless services."

That's important, he said, if Cisco hopes to loosen the grip Alcatel has on that particular market. Adding S-A will also provide Cisco with video expertise and an entrée into the residential set-top market, he added.

He warned, however, that integration of the two companies and their differing cultures will be difficult, at best, noting that Cisco's two largest acquisitions to date - Cerent in 1999, and Statacom in 1996 -- were much smaller companies than S-A.

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