Cisco buys Arroyo as part of push into video market

It’s beginning to look a lot like the late 1990s, and not because of all the lavish parties that VCs and entrepreneurs are throwing to launch their startups. Cisco Systems Inc. (Nasdaq: CSCO) is on an acquisition binge. The San Jose, Calif.-based company, which bought dozens of companies in the mid and late 1990s, announced today it has agreed to acquire VC-backed Arroyo Video Solutions Inc., a Pleasanton, Calif.–based provider of on-demand TV solutions. The deal is valued at about $92 million in cash, and is expected to close by the end of October. Arroyo has raised about $27 million in VC funding from such firms as Foundation Capital, Comcast Interactive Capital, DCM-Doll Capital Management, Matrix Partners and Time Warner Investments.

The acquisition is the latest in a string of investments by Cisco, which is building itself into a video infrastructure player. In November 2005, the company bought Scientific-Atlanta, the second-largest maker of cable TV set-top boxes in the United States, for $6.9 billion. The deal gives Cisco about 40% of the market for set-top boxes that bring cable TV into homes via IP streams. Scientific Atlanta also makes digital video recorders, cable modems, cable set-top boxes and IP TV networking gear for service providers.

The strategy of dominating the market through acquisition mirrors what Cisco did a decade ago when it became the “plumbers of the Internet” by acquiring companies and partnering with others to make inroads outside of routing equipment. —Alastair Goldfisher