Why Cisco Is A Logical Choice To Buy Sony

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During the past five years, Cisco has invested significantly in consumer electronics technology. They are building out massive content engines that will allow Hollywood content providers to deliver vast amounts of movie and music content to global audiences.

At the recent CES Expo in Las Vegas they rolled out new Wireless audio systems, storage devices and new network gear. They have invested millions into consumer electronic start up companies and own the iPhone brand which is currently parked over at Apple.

They also have over $A42 billion cash reserves of which $36 billion is languishing in overseas accounts predominantly in Asia. In fact, Cisco Systems has more cash on hand than any other technology company and that includes both Apple and Microsoft.

At CES I spoke directly with John Chambers, the CEO of Cisco, prior to his big roll out of new consumer electronics products and it is crystal clear that he has a white hot desire to be a major player in the CE marketplace.

In the US and shortly in Australia, if Telstra pick up the Cisco owned Scientific Atlanta Gateway box, Cisco will have a major presence in the set top box and gateway market where, at last count, they owned 61% of the US market.

Also, if Cisco has their way, these boxes along with Cisco powered devices – from video players and new wireless audio devices to new Cisco powered routers – will be streaming content into homes direct from Cisco powered servers and telecommunication providers like Telstra, Optus and Vodafone who use Cisco network gear to manage vast amounts of content and network communication.     

 On the other hand, Sony is a consumer electronics basket case in urgent need of surgery which Cisco could easily perform.

On May 14th, they are set to report losses in excess of $A4 Billion dollars and in an embarrassing admission recently, their Welsh CEO Sir Howard Stringer admitted that not one single product category in their consumer electronics division was profitable. He also said that brands like Playstation and their Bravia TV’s had never made a profit during their entire product life.

So why is Cisco the ideal Company to turn Sony around?

 

Firstly Cisco is a networking company, who are also pretty good at delivering software. They have an excellent understanding of marketing and already have a foothold in the consumer electronics marketplace through the acquisition of Linksys along with several other consumer related companies such as Avega, an Australian wireless development company which Cisco tipped $7M into 18 months ago.

Cisco has also been up front about plans to make acquisitions. Last week, John Chambers, the chief executive at Cisco, said that he looks to strike next in the consumer electronics market, bolstering its home networking businesses.

In addition, Cisco has gobbled up security, software and hardware companies at a furious pace over the past five years. They even purchased a digital camera company some months ago however this deal is still not over the line.  

At the same time, the home electronics market has been coming to Cisco with the likes of Sony now claiming that the hot new trend is networking across TV’s, Blu ray payers, set top boxes and even Hi Fi devices.

They also claim that content will be king – a claim which Cisco would agree with. It is why they are tipping millions into building out a brand new content platform called Cisco Eos that allows media & entertainment companies to create, manage and grow online communities around their content. “This content will be available to countries outside of the USA” said Chambers.

Sony powered by Cisco has a real nice ring to it and it makes a lot of sense.

A Cisco management team coupled with some of the rising design and engineering talent in Sony would be able to deliver the next generation of networked products for the home using the brand equity that a Sony/Cisco deal would deliver.

They could jettison or sell off large slabs of Sony while using the combined skill sets of the two companies to take on the likes of Apple, Samsung LG and Panasonic in what is set to be a bruising consumer electronics battle driven by networking and content on sexy devices. 

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