Linksys to buy Danish entertainment gear vendor

Cisco Systems’ Linksys division is set to make a leap into networked entertainment devices on Friday with the acquisition of Horsholm, Denmark-based KISS Technology.

KISS, whose name stands for Keep It Simple Solutions, makes a range of consumer products for the European market that includes DVD players, a video recorder, and a plasma TV that all can link into home data networks.

Linksys will pay about $61 million in cash and stock for all the shares of KISS and will integrate the company into Linksys upon approval of the deal, expected in the first quarter of Cisco’s 2006 fiscal year, ending in October. Following the acquisition, KISS will continue to sell its current products in Europe under the KISS brand for a long period of time, said Janie Tsao, a cofounder of Linksys and senior vice president of sales, marketing and business development. Meanwhile, Linksys will examine how to use KISS’s technology, what products to sell long-term, and how to brand and sell them in other markets, she said.

Linksys, the biggest vendor of home networking equipment such as Wi-Fi routers, wants to get into “networked entertainment” products such as DVD players that can communicate with PCs and other devices on a home network and send video streams to a television, Tsao said. It may integrate some KISS technology into networking devices such as routers and multimedia gateways. However, in the long term, it doesn’t plan to make “pure” consumer electronics products such as TVs and audio systems, she added.

“We’re not selling TVs, but we’re selling the connectivity to the TV,” Tsao said of the long-term Linksys strategy, acknowledging that the line between connectivity and consumer electronics devices is blurring as the family entertainment center converges with the home network. Linksys currently sells a “Media Center Extender” for wirelessly connecting Windows Media Center PCs with home entertainment systems, as well as game adapters for linking game consoles to a wireless LAN and a Wi-Fi music system that can send digital music to a home stereo or play it on its own detachable speakers.

Networked entertainment is a critical product segment for Linksys, Tsao said.

“This gives us the capacity and the capabilities that will bring us into this particular segment. … This potentially can be a huge segment for us,” she said. The company’s entertainment products will be standards-based and interoperate with other vendor’s devices, she said.

Linksys will also examine whether to expand its current retail channels, which include big U.S. computer and home electronics stores such as CompUSA and Best Buy. High-end audio and video stores might be an additional channel, Tsao said.

The worldwide home networking market, including both connectivity equipment and networked consumer electronics gear, will surpass $20 billion in annual revenue by 2009, estimates market research company In-Stat, in Scottsdale, Arizona.

Digital home entertainment is still in its infancy, though growing, said In-Stat analyst Michelle Abraham. The key to overcoming consumer resistance is likely to be simplicity, she said.

“You need to make the devices as easy as possible, really plug and play,” Abraham said.

Privately held and founded in 1994, KISS has 65 employees, according to Linksys. This is the second acquisition for Linksys, which became part of Cisco in 2003. In April it acquired VoIP (voice over Internet Protocol) technology vendor Sipura, in San Jose, California.