Microsoft News Tracker

David Kirkpatrick at Fortune:

Microsoft’s forays into TV land just got more complicated. Cisco Systems’ recent deal to buy cable television set-top box maker Scientific-Atlanta for $5.3 billion may disrupt the software giant’s partnerships with television providers and spark another round of fisticuffs between Microsoft and Google. At least, that’s how Mike Volpi sees it. As senior vice president for Cisco’s routing and service provider technology group, Volpi will oversee the company’s acquisition of Scientific-Atlanta (S-A).

Cisco’s purchase, which still needs SEC and shareholder approval, will bring a brand new type of end-user product—cable TV set-top boxes—to the networking-equipment company. Volpi, in his first interview since sealing the deal, told me where Cisco sees online video going, how the deal fits into the company’s strategy, and what he believes it may mean for Microsoft.

Microsoft would love to provide the software for the world’s Internet-protocol television video, or IPTV, which is delivered to you when you want it over the net. The software giant has made progress selling its software to telcos like BellSouth, AT&T (SBC Communications changed its name after it completed its merger with the long-distance telecom provider), and Verizon. And S-A has been working with Microsoft—its IPTV boxes at AT&T, for example, run Microsoft’s code.

But until now Microsoft’s partner in IPTV has been Cisco rival Alcatel. Microsoft sells its software alongside Alcatel’s routers. Volpi sees the S-A acquisition as a way to potentially disrupt that partnership, pull Microsoft closer to Cisco, and sell more of Cisco’s own routers to telcos. “Now,” he said, “we offer a better end-to-end platform for video rather than just the pure play in routers like we were before. That means Microsoft is probably more inclined to work with us.”

If Microsoft demurs on partnering, Cisco has a fallback position. There are plenty of other potential partners.

And that’s where Google comes in. More by following the link, but it has more plot twists than a bad mystery novel.