NEW YORK – Cisco Systems Inc. (CSCO) Friday said it would buy Scientific-Atlanta Inc. (SFA), a leading U.S. maker of cable television set-top boxes, for $6.9 billion in a deal that would move the networking equipment giant more deeply into the consumer market.
The deal is part of Cisco's efforts to find new technologies and businesses to spark revenue growth and boost its stock.
Cisco will pay $43 a share for Scientific-Atlanta, a 3.7 percent premium over the stock's closing price of $41.45 on Thursday. The stock has risen almost 26 percent in the past four weeks on speculation that the company would be bought.
One analyst said the deal would intensify competition in the set-top box market, which is dominated by Scientific-Atlanta and Motorola Inc.
"Cisco is starting to identify the next phase of its growth and it could conceivably help," Sanford Bernstein analyst Paul Sagawa said of the deal. "Investors had started to show concern it lacked that something for the next phase of its growth."
In pre-market trading on the Inet electronic brokerage system, Cisco shares were down 0.58 percent at $17.27, while Scientific-Atlantic shares were up 2.5 percent at $42.50.
Cisco said the net cost of the acquisition would be $5.3 billion, after subtracting Scientific-Atlanta's existing cash balance. It plans to assume outstanding Scientific-Atlanta options.
The deal has been approved by the boards of both companies and is expected to close next spring, Cisco said.
Cisco said the acquisition would be neutral to its 2006 earnings and add slightly to 2007 profit, excluding certain items.
"Video is emerging as the key strategic application in the service provider triple-play bundle of consumer entertainment, communication and online services," Cisco Chief Executive John Chambers said in a statement announcing the deal.
Scientific-Atlanta will become a division of Cisco under the leadership of Cisco Vice President Mike Volpi. The set-top box maker's chief executive, Jim McDonald, will report to Volpi.
Fox News First
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox.
By entering your email and clicking the Subscribe button, you agree to the Fox News Privacy Policy and Terms of Use, and agree to receive content and promotional communications from Fox News. You understand that you can opt-out at any time.