Cisco Said to Hire Barclays to Sell Linksys Division
Cisco Systems Inc. (CSCO), the largest maker of equipment for computer networks, has hired Barclays Plc (BARC) to find a buyer for Linksys, which makes routers for home wireless access, said people with knowledge of the situation.
The unit may attract the interest of TV set makers seeking a recognized brand and technology, said the people, who asked not to be identified because the process isn’t public. Linksys is likely to fetch much less than the $500 million Cisco paid for it in 2003 because it is a mature consumer business with low margins, the people said.
Linksys has lost market share to Netgear Inc. and competes in an industry where prices are falling, said Joanna Makris, an analyst with Mizuho Securities USA Inc. in New York. Cisco doesn’t break out Linksys figures, but it’s a primary component of a division whose sales have fallen 35 percent over the past two years, according to regulatory filings.
“I’m just glad they’re getting rid of it,” Makris, who has a buy rating on Cisco stock, said in an interview. “They’re gradually admitting some of their mistakes.”
Karen Tillman, a spokeswoman for San Jose, California-based Cisco, and Marc Hazelton, a spokesman for London-based Barclays, declined to comment.
Cisco wants to sell Linksys as part of its strategy to exit consumer businesses while expanding in corporate software and technology services. Chief Executive Officer John Chambers eliminated 7,800 jobs over the past year and a half and closed businesses such as the Flip video-camera unit amid a slowdown in sales growth after a foray into consumer technologies backfired.
The company’s shares rose 1.3 percent today to $20.11. The stock has increased 11 percent this year.
Potential buyers for Linksys include Western Digital Corp. (WDC), Belkin International Inc., Arris Group Inc. (ARRS) and Pace Plc (PIC), which all make networking products, Makris said. Arris and Pace have each placed bids on Google Inc. (GOOG)’s Motorola Home Business, which sells set-top boxes, Bloomberg News reported Dec. 10.
Leah Polk, a spokeswoman for Belkin, Steve Shattuck, a spokesman for Western Digital and Alex Swan, a spokesman for Arris Group, declined to comment. A representative for Pace didn’t immediately return a message seeking comment.
In addition to Linksys, Cisco operates in the home market with its Scientific Atlanta set-top-box unit and with NDS Group Ltd., a software maker for paid-television channels used by British Sky Broadcasting Group, Canal Plus and DirecTV. Cisco bought NDS in July for $5 billion.
Barclays is also advising Google on the sale of its set-top box division.