NEW YORK (CNN/Money) -
Cisco Systems Inc. agreed Friday to buy Scientific-Atlanta Inc., one of the largest makers of set-top boxes used by cable subscribers, in a cash deal with $6.9 billion.
Cisco (Research), the leading maker of Internet equipment, paid $43 a share for the company, a premium of less than 4 percent above Scientific-Atlanta's (Research) closing price on Thursday.
But shares were already up almost 19 percent from its close on Nov. 2, the day before the New York Post reported that Scientific-Atlanta had hired two investment banks to explore a possible sale of the company. That report said the company could fetch $42 a share.
The deal is a further sign of the blurring of technology lines. The Internet, in which Cisco has long been a dominant player, is playing a bigger role in delivering voice communications and entertainment to households. And traditional cable companies are becoming major providers of high speed Internet connections to homes. Cisco and other technology companies have been trying to expand beyond their traditional niches in response.
"Video is emerging as the key strategic application in the service provider triple play bundle of consumer entertainment, communication and online services," said a statement from Cisco CEO and President John Chambers "The addition of Scientific-Atlanta further extends Cisco's commitment to and leadership in the service provider market."
Earlier this year Cisco bought KiSS Technology, a privately held Danish tech firm that makes consumer electronics such as DVD players and digital video recorders that can connect to a home network and access content from the Web.
Scientific-Atlanta has been seen as one of the more attractive targets due to this industry trend. It has been the No. 2 maker of set-top boxes behind Motorola (Research), and the two together have formed a virtual duopoly control over the U.S. market.
Scientific-Atlanta was also an attractive target due to a strong balance sheet with about $1.6 billion in cash on hand, which Cisco said lowered the net cost of the deal to $5.3 billion. The Post report from early November also pointed out that lack of a succession plan by Scientific-Atlanta's 65-year-old CEO James McDonald, who has been at the helm since 1993, had been fueling takeover talk at the company.
For a look at how cable equipment companies have become hot stock targets, click here.