After the acquisition, expected to close in the first half of calendar 2010, the DVN set-top box business will become a part of the International Cable Business Unit within the Service Provider Video Technology Group (SPVTG) at Cisco led by Ken Klaer.

The company has also entered into a go-to-market alliance with the remainder of the DVN organization to utilize the company's middleware and advanced applications as well as integration and support services.

The investment is part of Cisco's ongoing long-term commitment to China. The company said the Chinese cable market with 160 million subscribers and the Chinese government's plan for full digitization of the market by 2015 offers it a long-term opportunity.

Klaer said: "Cisco and DVN have similar cultures that emphasize video innovation and a shared vision to enable multi-media connected homes across China. With this acquisition, we will offer customers the powerful combination of DVN's products with the Cisco IP Next-Generation Network platform."

Cisco is expanding its portfolio through acquisitions. Last month, it announced its intent to acquire London-based software-as- a-service (SaaS) web security solutions provider ScanSafe Inc for $183m to expand its security portfolio. It also agreed to acquire IP-based mobile infrastructure solutions provider Starent Networks for $2.9 billion to expand its mobile internet offerings for service providers, and Norway-based video communications provider Tandberg for $3 billion to expand its collaboration portfolio.

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