Cisco Chasing After Couch Potatoes

LAS VEGAS ( TheStreet) -- Cisco ( CSCO) will roll out the next stage in its ambitious video strategy on Wednesday, and looks set to combine the worlds of traditional TV and Internet video in a new set top-box for cable operators.

Cisco's Web site heralds its CES press event as tying together different devices and content -- an initiative clearly focused on the home. "You're going to need a bigger couch," it proclaims. "Imagine a world where prime time happens all the time and the path to riches is paved with richer content."
Cisco CEO John Chambers

The networking giant's CEO John Chambers will use the press conference to discuss Cisco's video strategy, highlight new technologies and showcase a "next-generation user experience," according to the CES press site.

The Wall Street Journal recently reported that Cisco is prepping a hybrid set-top box that will combine online video services with live, on-demand and recorded television programming. Citing people familiar with the matter, the Journal said that Cisco will sell these boxes to cable operators, who will then lease them to subscribers.

A Cisco spokeswoman told TheStreet that the company doesn't comment on rumors and speculation, although a teaser posted by the company on Youtube offers some big hints as to the company's CES announcement. The video, titled "The Obsolete TV Support Group," promises that "a nearly infinite library of content" is coming soon.

The Internet video explosion has inspired a slew of technologies for delivering Web content, movies and TV shows to the home. As a result, cable operators such as Comcast ( CMCSA) and Time Warner Cable ( TWX) now find themselves up against Apple's ( AAPL) Apple TV, Google's ( GOOG) Google TV and Roku's streaming player.

A Cisco offering in the Internet TV space could serve as a sort of home entertainment god-box, combining cable TV and a wide range of Internet video, and could bolster cable operators' arsenals against the likes of Apple.

Cisco is no stranger to the cable market. The switchmaker already sells cable set-top boxes and has made a song and dance about its Explorer 8600HDC DVR, which also offers an IP services gateway for accessing Internet content.

A beefed-up Internet/cable TV box could also significantly strengthen Cisco's attempts to tap the home video market, potentially spelling good news for investors who were dismayed by Cisco's recent less-than-stellar first-quarter results.

With markets already saturated with networking gear, Cisco's video push shows that the company is looking for new and lucrative revenue streams. Last year, for example, Cisco unveiled its Umi home telepresence system, which aims to transform TVs into live-chat and video-making stations.

Cisco also spent $590 million to acquire Flip camera maker Pure Digital in 2009, and has subsequently sold more than 3 million of the devices. The company will join the tablet fray later this year with the launch of its Cius business tablet, which will combine high-definition voice and video with telepresence.

Cisco is also hoping that entering these new markets will boost demand for its switches and routers through video. The tech giant, for example, estimates that every dollar spent on its video technology drives $5 worth of networking sales.

--Written by James Rogers in New York.

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