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June 26, 2006 4:38 PM PDT
Cisco investments fuel consumer electronics push
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For much of its existence, the networking giant has used
But as Cisco
"Given the margin profile in the consumer market, it sometimes makes more sense for us to look at investments to shape our strategy," said Charles Carmel, director of corporate business development for the company. "We also see investments as a complement to acquisitions."
Since 2003, when Cisco entered the consumer electronics business with the
Cisco's home-networking vision is to offer devices that can be connected to the Internet, as well as to other entertainment gadgets in the home. And it plans to offer the networking equipment, such as wireless routers, used to shuttle IP packets of music, video or interactive games throughout the home.
But to fulfill this vision, it needs access to content and security technology to protect copyright movies or games. And the company sees partnerships as a good way to meet these goals.
"There are a number of markets where we don't want to participate directly," Carmel said. "But we want to influence how the software or silicon develops to complement the markets we are in. So we invest in companies that may supply Cisco."
For example, on Monday, the company said it participated in a $15.5 million round of funding for
Akimbo, which had been selling its own hardware along with its service, has shifted its business model recently so that its software and service can work on other companies' hardware. Cisco expects to offer the Akimbo service as part of a package of content services that will ship with the Kiss DVD/DVR device when it launches in the U.S. market later this year.
To keep content secure, Cisco announced in April that it had invested in a digital rights management company called
Cisco also has made strategic investments in gaming companies such as TerraPlay, IndiaGames, Exent and Emergent. And it has invested in start-ups Broadlogic and Entropic.
As for turning any of these investments into acquisitions, Carmel said an investment in any company--whether it be for the consumer group or for Cisco's core networking groups--is not a precursor to an acquisition.
"We use investments for new market learning in areas where we don't participate," he said. "Sometimes it happens where we buy a company we've invested in, but it's not common."
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