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Cisco receives investor pressure to divest its TV set-top box business

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December 11
11:24 AM 2013

According to a Reuters article, the mounting pressure on Cisco Systems Inc Chief Executive John Chambers by investors has been growing due to the company's television set-top box business. Investors wanted Chambers to divest the business as the business' decreasing revenue and profit margins affects the rest of the company.

The news agency pointed out that although the divestment of Cisco's set-top boxes business for televisions has been decided, there are only few takers in the market. The former Scientific Atlanta, which was picked up by Cisco in 2005 for $6.9 billion could be shut down, said analysts.

On November 13, the market was shocked when Cisco announced that its revenue could fall up to 10% this quarter, and that further decreases could be seen in the succeeding quarters, said Reuters. Cisco reportedly blamed the weakness of the emerging economy, political backlash in China and a host of company-specific problems. Cisco is set to host a Financial Analysts Conference on Thursday, and that investors are hoping that the company could provide a clear, itemized version of such problems and its individual impact to the company, the report said.

However, majority of industry analysts believed that the set-top business is to blame. Raymond James analyst Simon Leopold said the business would have been an almost $1 billion revenue Cisco had missed for the fourth quarter.

The set-top business, Reuters said in its report, represented 5% of Cisco's total revenue. Cisco's first fiscal quarter that ended in October saw a 20% decline in this business unit.

Thrivent Asset Management analyst Peter Karazeris, whose company has 4 million shares in Cisco as among its $82 billion in assets managed, said "I'd like to see more definitive action there. I think this is diluting the attention." Karazeris also added that Cisco needs to move on from its set-top business as it is past its prime, and foresees a strategy change will be conducted by Cisco that could boost its shares at a time when investors had little to look forward to.

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