NDS, founded in Israel and headquartered in London, is currently owned by private equity fund Permira Advisers LLP and New Corp. The company develops interactive software to manage delivery of entertainment and data to digital televisions, set-top boxes, computers and smartphones.

San Jose, Calif.-based Cisco is already a major vendor to cable companies stemming from its 2006 purchase of set-top box manufacturer Scientific Atlanta Inc. for $6.9 billion. The company said that its purchase of NDS would complement its Videoscape entertainment delivery platform, taking it into emerging markets including China and India where NDS has existing customers.

"Our strategy has always been driven by customer need and on capturing market transitions," Cisco chairman and CEO John Chambers said in a statement. "Our acquisition of NDS fits squarely into this strategy, enabling content and service providers to deliver new video solutions that leverage the cloud and drive new monetization opportunities and service differentiation."

Cisco has continued to be active in the video delivery area, in 2009 adding Tandberg ASA for $3.4 billion and last October buying BNI Video for $99 million.

NDS was founded in 1988 and taken private in 2009 by Permira and long-time investor News Corp. in a deal that valued the company at $3.7 billion. The investors put NDS on the block last summer, exploring both sale options and the possibility of an initial public offering. The company employs 5,000 in the U.K., Israel, France, India and China, and boasts that its VideoGuard product is deployed in 125 million households worldwide.

Cisco said that its purchase of NDS "is generally in line" with Ebitda multiples paid when NDS was taken private, and "within the multiples ranges" of other similar deals.

Cisco took financial advice from J.P. Morgan Securities Inc.'s Anwar Zakour and David St. Jean at Centerview Partners. The company received legal counsel from Fenwick & West LLP's Doug Cogen, Kris Withrow, Scott Spector, Stephen Gillespie, Matt Stewart and Adam Andrews.

NDS received legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP's Lou Kling, Howard Ellin, Allison Schneirov, Michael Chitwood and Daniela Tisch.