On March 15, 2012, Cisco announced its intent to acquire NDS Group Ltd, a leading provider of wide software and content security solutions that enable service providers and media companies to securely deliver and monetize new video entertainment experiences. This acquisition is a reflection of Cisco’s increased strategic focus on video, one of its five foundational priorities, and its investment in software and services revenue streams and competencies. In addition, the acquisition is an indication of Cisco’s desire to become the market leader in the market.
The acquisition strategy by Cisco will enable it complement and accelerate the delivery of VideoscapeTM, which is Cisco’s comprehensive platform that enables service providers and media companies to deliver next-generation entertainment experiences. This implies that Cisco will be able to increase its market share given that it will be able to offer the services that were previously offered by NDS in the market. In addition, the acquisition will enable Cisco to broaden its opportunities in the service provider market by expanding its reach into emerging markets such as China and India. This will be an advantage to Cisco because it has already established customer footprint in these markets.
Under the terms of the agreement, Cisco will pay approximately $5 billion, including assumption of debt and retention-based incentives, to acquire all of the business and operations of NDS. This means that Cisco’s net worth is likely to increase substantially, thus making it one of the largest service provider in terms of net worth and market coverage. This is likely to attract a large number of investors into the company. The impact of this to the company is that it is going to become popular among the investors, a thing that is likely to enable it increase its market share due to the increased popularity as well as increase its ability to raise equity capital due to the increased number of shareholders.
The boards of directors of both companies have approved the acquisition. The acquisition is expected to close during the second half of calendar year 2012, subject to customary closing conditions. The net impact to Cisco is expected to be accretive to EPS in the first full year on a non-GAAP basis. This means that Cisco’s assets and capital will gradual increase in size after the acquisition. During the first year, Cisco’s EPS will also increase substantially. This will also attract many investors in the company, especially shareholders with a desire to make long-term investments into the company in return of annual earnings in terms of dividends.
Cisco’s acquisition of NDS Group is a very good opportunity for our company to reap as much as possible through provision of investment advice to potential investors. Apart from offering investment advice to our clients, our company can also benefit from the acquisition by investing in the company in order to benefit from the large earnings that are likely to result from the acquisition by the end of the year. I would therefore like to request you to come up with the different ways in which our company can take advantage of the opportunities provided by the acquisition. We shall be having a meeting on March 22, 2012 in order to discuss your views. If you have any questions, please let me know before the meeting.