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Is TiVo next on Cisco's push into homes? | CNET News.com

Tivo and Cisco! Are they nuts?

Probably not.

The end game of digital convergence is the separation of vaulue creation into horizontal layers with individual competencies and branding in each layer. Put more simply, CMOS is the basis for computing, communication, and imaging. So, there will be someone whose job it is to make CMOS well, i.e. a fab. There will be someone whose job it is to design silicon. And there will be someone who moves bits around. Finally, there will be people who control the user experience of those bits. Simplistically, this leads to a world dominated by a few fabs (I don't know their names); Intel (who can design anything in silicon, and if faced by significant competition, can just buy them out); Cisco/Juniper; and HP/Apple/Dell; with Microsoft, Google, and Yahoo controlling the user experience. Everyone else is an acquisition target.

Each layer seeks to vertically integrate competencies from the layer above or below (or both) to create a marketn lock in effect. Thus Intel writes drivers for Microsoft, and seeks to set WiMax standards that suit its chip designs. Acquisitions allow a brand to broaden its reach and acquire essential competencies quickly.

TiVo therefore is a target both for Apple/Dell/HP (same level); Microsoft (from above); and Cisco (from below). Acquisitions from above or below lead to brand extension, and from the same level lead to brand dilution, but gain in market share.

I don't think there is a steady state here, with clean separation of layers. Players will constantly jockey for market locks. From a startup's perspective, the best thing to do may be to find a niche that provides brand extension and wait for eventual acquisition!

posted by S. Keshav @ Wednesday, February 01, 2006