Company with deep Israeli roots to be sold to Cisco for $5 billion

In one of the biggest tech deals in years, Cisco confirmed Thursday that it was buying UK-based NDS, a digital security company with a large R&D lab in Israel. According to an AP report, Cisco will buy NDS for about $5 billion, and the sale will include NDS development facilities in France, China, India and Israel. The report of the sale was also confirmed by Israel’s Finance Ministry, which said it was examining its tax implications.

“The decision by Cisco to purchase NDS for $5 billion is a clear affirmation of the company’s faith in the future of Israeli hi-tech,” Finance Minister Yuval Steinitz said in a statement.

Although not an Israeli company, NDS has its roots in research conducted at the Weizmann Institute of Science. The company was established in Israel in 1988, and was acquired by Rupert Murdoch’s News Corp in 1992 for $15 million.

NDS technology is installed in hundreds of millions of television set-top boxes and digital decoders. The company’s main business is security for digital television broadcasts. The NDS VideoGuard system is used by cable and satellite providers around the world to ensure that TV broadcasts are only available to paying customers.

The company also provides solutions for portable devices and web broadcasts, ensuring that digital video content can only be accessed by subscribers.

While the NDS facility in Jerusalem’s Har Hotzvim industrial area is the company’s main development center, the company’s headquarters are in London and its current majority shareholder is European private equity firm Permira.

A spokesperson for the Finance Ministry said that Steinitz was concerned that Israel would be unable to realize any capital gains from the sale, since both Cisco and NDS are not Israeli entities.

“It’s not certain that Israel will not be able to receive tax money from the sale,” the spokesperson told the Times of Israel. “Finance Minister Steinitz is checking with the Tax Authority to see what the legal and tax issues involved are,” she added.

NDS has long been an employment magnet for English speaking immigrants to Israel, and many of them can be found among NDS’s 1,200 Israeli employees.

Employees were being told of the buyout Thursday, and some were concerned over the future of the company – and of their jobs, as multinational buyers of Israeli companies often integrate operations with existing offices abroad, resulting in layoffs.

Cisco also has a significant presence in Israel, with several research facilities, but as one NDS employee said, “that is no guarantee of anything. We’ll have to wait and see how this plays out.”