Cable operators are entering a cycle of network and set top box upgrades to deliver advanced video services. Telco's also have begun building entirely new infrastructures for video entertainment. This cycle is projected to grow from $3.6 Billion in 2004 to $9.9 Billion in 2009. That is a compound annual growth rate of 22%!

Is there any doubt why Cisco would be interested in filling in its missing element -- video -- from its far-reaching effort to penetrate the consumer market? There is no way for them to buy Motorola, the largest provider of set boxes, so they picked up the number two player instead.

(below are excerpts from the Wall Street Journal, read the entire article)

The networking giant's $6.9 billion deal to buy Scientific-Atlanta gives Cisco a line of widely used TV set-top boxes as well as server systems used by cable operators to distribute programming. The technology and customer relationships could help Cisco sell products to carriers developing "quadruple-play" services, a term for offerings that encompass voice, video, Internet and wireless, the companies said.

"It's both a consumer play and a service-provider play, and a growth opportunity outside the U.S., where Scientific-Atlanta did not have as strong a presence," said John Chambers, Cisco's chief executive officer, in an interview.

Cisco ... mainly sells its networking devices to corporations and phone carriers. But the company also sells hardware that cable companies use to provide Internet access. In addition, it sells products such as wireless-access devices directly to consumers, since its 2003 acquisition of Linksys Group Inc.

Those technologies, combined with Scientific-Atlanta's expertise, could help Cisco exploit the conversion of video into the format used on the Internet. That evolution can make today's cable systems more efficient, as well as bypass such video-only networks to allow the delivery of programming over the Internet...

While Scientific-Atlanta will be largely operated independently, the two technical teams will work closely together, the companies said