A shot across the bow

Cisco Systems to buy IP-video supplier SyPixx Networks
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Saturday, April 1, 2006

SAN JOSE, Calif.--In a move anticipated by many industry observers, router and switch giant Cisco Systems has announced an intent to buy SyPixx Networks, a Connecticut-based manufacturer of encoders/decoders, transmission equipment, management software and more geared toward the IP video market.
"SyPixx is what's part of what we call an emerging technology," said Cisco director of product marketing Steve Collen. "It's a business space that has large revenue potential for us and drives our existing core business, routers and switches. Because video surveillance is an application running across the network, it's also an application that drives the revenue of our routers and switches."
Collen cited analyst data that says the digital component of the IP video market alone will be around $2 billion in 2007, with associated services growing the market to roughly $7.5 billion. He sees the market growing anywhere from 30 to 50 percent annually.
If the roughly $51 million purchase comes to fruition, it will not only allow Cisco to get a toehold in the IP video surveillance market, said Collen. SyPixx, which will be rebranded as Cisco, also "offer us encoders and decoders that translate from analog to digital environments. So we can take an analog camera and connect it to an IP network, as well as providing us with the interface to video storage, so we can access analog and digital video."
"It's a really good play," he continued. "It also gives us access to this really good legacy base. The legacy equipment has lots of drawbacks. It's difficult to call up remote video, live or stored." Going to network, that gets much easier, he said.
"Cisco buying SyPyxx is the shot across the [security] industry's bow," said consultant Dan Dunkel, president of New Era Associates, which specializes in helping companies integrate new technologies. "If you're not going to wake up to video over IP now, you're never going to wake up," he said. "Ignore this at your own peril."
Dunkel had just returned from seeing Cisco president and chief executive officer John Chambers give the keynote address at VoiceCon Spring 2006, in Florida, March 7.
"Chambers said that innovative companies get to market first," Dunkel related. "They don't analyze things to death and they beat their customers there." He said Chambers in his presentation related how Cisco made the commitment to TCP/IP in 1997. "They made that bet then that IP was going to be the interoperability standard ... They bet early on IP. They showed you with data, then they showed you with voice, now they're going to show you with video."
Part of that video push came last year with Cisco's purchase of video systems giant Scientific Atlanta, known for making cable TV-top boxes, for $6.8 billion, which just closed at the end of February. It made Comcast, Time Warner Cable, AT&T and Cablevision into Cisco customers and gave Cisco "unmatched expertise and an industry-leading array of products for transporting video all the way from the broadcast studio to the home TV," according to industry analyst Deb Mielke, with Treillage Network Strategies, quoted in a Cisco-generated news item.
"We've done something similar in IP telephony," noted Collen. "We're taking an emerging technology and mainstreaming it."
Cisco has created a the Converged, Secure Infrastructure Business Unit within its Physical Security division, and Collen said Cisco is "looking at a lot of possibilities. Video surveillance is the entry point, and we'll be looking at other entry points into the physical security."
He also noted that Cisco will bring SyPixx's existing integrator partners into their Advanced Technology Partner program to get them up to speed on networking capabilities. "We're looking for partners that have physical and networking security already, and expanding their capabilities in that respect."
Dunkel said the security industry better be ready to get on board the IP video train and not just because of this Cisco purchase. "They've got to be worried about the Cisco channel," he said. "[Cisco's] strategy is going to flow down to their resellers, and they're going after it now. They just got their ticket punched to sell video surveillance over IP. If that doesn't translate to a threat, then they just don't understand the convergence model."