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Cisco Pays $92M For VOD Startup

Networking giant Cisco Systems will pay $92 million for Arroyo Video Solutions, a small privately held video-on-demand (VOD) company with some big customers.

Cisco, which bought set-top maker Scientific-Atlanta in November, will integrate Arroyo's on-demand software into its routers.

This will allow it to bring on-demand content to the Web and mobile phones, as well as the television screen, according to Cisco.

"The industry is quickly evolving from pure video-on-demand to anything on-demand with any content delivered to any end device," said Michelangelo Volpi, senior vice president and general manager for Cisco's routing and service provider technology group, said in a statement.

The 44-employee Arroyo will be integrated into the Cisco Cable & Video Initiatives Group under Volpi.

Arroyo produces "the best software for networked DVRs," said Michael Howard of Infonetics. Cablevision, Comcast and Time Warner use the software for their DVRs.

Purchasing Arroyo allows Cisco to sell end-to-end video packages to cable companies and other content providers looking to reduce the number of vendors, said Howard.

The transaction, still requiring regulatory approval, is expected to close by Oct. 31, 2007, according to Cisco.

Along with its flexibility for VOD, on-demand also permits cable and telecom operators to insert individualized advertising.

For instance, someone watching the recent Tour De France could receive ads for bicycles and sports-related products.

"Right now, on demand is on TV only," Ron Piovesan, a Cisco spokesperson said. "Video is only the start."

But Arroyo's software is an "on-demand engine," targeting mobile phones and Web pages, as well as video, according to Cisco.

Along with the acquisition comes the Arroyo team, which includes Drew Major, a former founder of Novell , and Paul Sherer the former CTO of 3Com .

The video plays are making an impact. In July, Motorola announced it would acquire video-on-demand company Broadbus Technologies.