Technicolor is to acquire the Cisco set-top box business for €550 million. The sale comes ten years after Cisco entered the market by buying Scientific Atlanta for $6.9 billion. Cisco is planning to prioritise cloud services and the internet of things rather than producing products for the home. While service providers still see the need for set-top boxes, much of the value is shifting to services in the network cloud.

Cisco will receive approximately $450 million in cash and approximately $150 million in Technicolor shares.

Technicolor says it will make it one of the global leaders in customer premises equipment. It will have an installed based of around 290 million set-top boxes and around 185 million gateway devices in over 100 countries. With 60 million devices shipped each year and a worldwide market share of around 15% it will have revenues of around €3 billion.

As part of the agreement, Technicolor and Cisco will partner to develop and deliver next generation video and broadband technologies. They have also entered into a long-term cross-licensing agreement covering specific intellectual property and patents.

“We know that video expertise is essential to the future of creating outstanding network and home infrastructure products and services,” said Frederic Rose, the chief executive of Technicolor. “Through this acquisition and strategic agreement, Technicolor can immediately bring its unrivalled experience and innovation in video creation, delivery, and display to more customers in more geographies, while strengthening our position as a technology leader.”

John Chambers, the chairman said: “we have the right company in Technicolor to drive the future of the CPE business to deliver what our customers and partners need, today and into the future”.

Chuck Robbins, who is taking over as chief executive of Cisco, wrote: “With this move, we are prioritizing our investments to deliver on our strategy of video in the cloud, and will partner with Technicolor to position the CPE business and its employees for future success.”

Cisco got into the set-top box business ten years previously with the acquisition of Scientific Atlanta for $6.9 billion. It subsequently acquired NDS for $5 billion.

Scientific Atlanta and Motorola dominated the set-top box market for many years. Google acquired the Motorola set-top box business as part of its purchase of Motorola Mobility for $12.5 billion. It subsequently sold the set-top box business to Arris for $2.4 billion in 2013. Arris went on to acquire the British company Pace for £1.4 billion.

Technicolor was formerly Thomson and Thomson Multimedia. The French multinational was rebranded Technicolor after its American subsidiary in 2010.