Scientific Atlanta Inc.Manufacturer of Electronic EquipmentDecision on Adding a New Product by Acquisition Bishnu Kumar 11EX-013 Davinder Singh 11EX-015 Prateek Wadhwa 11EX-040 Rajat Goel 11EX-043
Scientific Atlanta Inc. – History1951 - Founded by six professors in Georgia Institute of Technology1960 - Earned a place in the space and defence industries as a manufacturer of electronic testing equipment for antennae1971 - New President Sidney Topol sets out to double the size of company by implementing a long term plan • Reduce or sell off operations in which company was losing money • New opportunities with large growth potential and few barriers to entry • Aggressive R&D • Strong marketing effort
Scientific Atlanta Inc. – History1978 – • Sales reached $94.2 Million with earnings of $5 Million • Opened new facilities in Alabama, New Jersey & Scotland • Acquired Adar Associates, a company based in Burlington, Massachusetts1980 - Became world’s largest supplier of earth stations.1986 – • Begins retooling, refocusing and restructuring • Sold 7 of its 25 business ventures including home satellite business and coaxial cable subsidiary • Resulted in $9.2 Million loss
Scientific Atlanta Inc. – History1993 – McDonald became CEO, oversee large investment in Cable Industry1997 – Company started focusing on CATV, sold off several units including its venerable microwave.2000 – • Sold satellite networking division to ViaSat for $75 Million • Consolidated Mfg. and Admin functions across company divisions • Expand production & signed several international deals2001 – Orders dropped, share price declined half, lay-offs began2005 – Purchased by Cisco Systems
Scientific Atlanta Business- Spencer Kennedy wanted to sell its amplifier due to lack of business caused by FCC freeze on new cable system construction.- Scientific Atlanta felt purchasing the amplifiers would promise • expanded role CATV industry • makeup for lost business from decrease in military market- Scientific Atlanta developed products like Electronic instruments capable of automatically measuring and recording signal patterns transmitted from high frequency antennas, earth terminals , surveillance receivers and manual and slaved satellites and missile tracking systems- For CATV industry, manufactured • a microwave relay system • full line head-end equipment
FCC Freeze• Prohibited further expansion in top 100 television market.• Cable TV systems were initiated in local areas where Television reception was poor or non existent.• As long as CATV was limited to areas that could not otherwise get good TV signal broadcasters and FCC were happy.• With the proliferation of cable systems expansion pressure increased where 87% of the television sets were located.• Due to this cable operators had to provide something new to differentiate their service. • News and weather reports • Stock Market tickertape • Time & temperature report • Channel from distant metropolitan areas.
Channel from distant metropolitan areas• Broadcasters and FCC expressed concerns.• FCC decided- • CATV industry to be regulated • Agency adopted rules that prohibited further expansion in top 100 television market• Remote areas still open for continued development• If FCC permitted cable into the cities- • required new technology • Additional electronics in the houses
Should Scientific-Atlanta Inc have purchased the new two- way amplifier from Spencer Kennedy Laboratories? Justify your opinion.Yes –• The company would become a full-line supplier• It would mean competing with companies that were formerly customers• Being a full-line supplier would mean increase in number of orders tending to restrict the potential customers to cable system operators.No –• FCC Freeze so no expansion in the current television market.• Overestimation of sales figures.• Additional electronic equipment is required at home for the setup of the two way amplifier which will involve cost for household.• Acceptability of digital control center for a two way system.
What are the dangers of being overly dependent on one customer, such as the Federal Government? Are there any advantages?-Dangers• Any strategic change such as business line, product innovation in “customer company” will affect the sales• Direct Dependence on customer’s sales-Advantages• Can become the full line supplier for the company• Can use the company as testimonial to acquire another customers• Brand loyalty will bring word of mouth publicity and referrals to bring new customer