Cisco sees declines in its Service Provider video segment
In the prior parts of this series, we have discussed Cisco’s (CSCO) growth areas such as integrated infrastructure solutions and Nexus switching products. However, one segment that continues to decline for Cisco has been the Service Provider video, or SP video segment. As the chart below shows, this segment’s YoY (year-over-year) revenue growth rates continue to remain in negative territory.
Although Cisco sells set-top boxes under the SP video segment, the market is moving toward the Converged Cable Access Platform (or CCAP). CCAPs are multifunctional devices that can offer higher broadband speeds and deliver video programming through a cable network. In this regard, Cisco recently launched its first CCAP, named cBR-8, that will enable broadband providers to provide Internet speeds of up to 10 Gbps to their customers. Cisco noted that Comcast (CMCSA), Altice, and other cable providers have started to adopt this technology.
Cisco losing share in cable broadband market
The main reason for Cisco’s decline in the cable broadband segment is its inability to hold onto its share in that market. According to a May 4 report from the Wall Street Journal, citing the market research firm IHS, Cisco’s share in the cable broadband market declined from 52% in 2013 to 29% in 2014. The chief beneficiary from Cisco’s loss in this market was Arris Group (ARRS), followed by Casa Systems. Arris Group is currently the leading player in this market, with a share of 48%, as the chart above shows.
According to another report from IHS, the merger between Comcast and Time Warner Cable (TWC) could have had a detrimental impact on the cable broadband market. However, this merger was called off by Comcast in April this year. To gain diversified exposure to Cisco, you can invest in the Technology SPDR ETF (XLK). XLK invests 3.6% of its holdings in Cisco.