Cisco gets out the cheque book again

Thursday, October 1, 2009 by Angela Ashenden

Cisco today announced its intention to acquire Norwegian video systems provider Tandberg, in a deal worth a whopping $3 billion. Tandberg is one of the leading players in the video conferencing market, claiming a 41% share of the market in 2008. The major reason for Cisco’s acquisition – aside from its target’s customer base – is Tandberg’s standards-based technology, which allows interoperability with any other standards-based video solution, and enables Cisco to build on its vision of video becoming the communications mechanism of choice within businesses and households alike. From a collaboration software persective, Cisco intends to build video more centrally into its collaborative solutions, particularly WebEx (which, of course, it acquired for a fraction more at $3.2 billion in 2007), continuing its “network as the platform” strategy.

The actual overlap between Cisco and Tandberg’s technologies is small – while both vendors have Telepresence solutions, Cisco’s Unified Videoconferencing solution embeds third-party RADVISION’s software (RADVISION issued a statement today advising that it is, understandably, “assessing the effect of this proposed transaction”). Presumably this will ultimately be replaced by Tandberg’s solutions although no specifics have yet been confirmed.

This acquisition should be positive for both Cisco and Tandberg’s customers – from the perspective of Cisco’s customers, greater levels of interoperability are always well-received, and Cisco has traditionally handled the transition and upgrade processes well following its acquisitions. From the perspective of Tandberg’s customers, Tandberg is to continue as a separate operation at least in the short-to-medium term, so current customers should be relatively unaffected.

There are implications for the rest of the market – Tandberg’s major competitor, Polycom, remains independent, although its 2008 annual report already indicated that it feared the threat of “a direct competitor” being acquired by a company such as Cisco. It is reasonable to suggest that Polycom will not be independent for long, although it remains to be seen who might be a potential suitor.

I’ll be investigating the implications of this further in a Market Insights report, so stay tuned!

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Posted in Collaboration