Optical/IP Networks

Cisco to Buy WebEx for $3.2B

Cisco Systems Inc. (Nasdaq: CSCO) is to become a fully fledged service provider by acquiring Web conferencing services specialist WebEx Communications for $57 in cash per share, or $3.2 billion, the IP networking giant announced today.

Cisco's chief development officer, Charlie Giancarlo, told a conference call that the acquisition is "the latest step in [Cisco's] vision for collaboration services" that will become increasingly important for business and residential users. "It's a natural extension for our vision of unified communications and collaboration over the open platform of the Internet."

WebEx's services are used by companies in one of Cisco's main growth sectors. "WebEx allows small and medium-sized business users to have access to the kind of communications" usually the reserve of much larger enterprises, noted Giancarlo, adding that "SMB is one of Cisco's fastest growing markets."

WebEx, which offers its services on a subscription basis, has more than 2 million registered users from the SMB community. The company generated revenues of $380 million and net income of $48.6 million in 2006. It has 2,200 employees.

Cisco's offer constitutes a 23 percent premium over WebEx's Wednesday closing price of $46.20, which valued the company at $2.3 billion. The news sent Cisco's stock down 13 cents, about 0.5%, to $25.72.

The deal is set to close in the fourth quarter of Cisco's financial year, which closes at the end of July. Cisco expects the deal to be neutral to its earnings in its 2008 fiscal year and accretive in the following financial year.

The acquisition will put Cisco into direct competition in the online communications and collaboration services sector with Microsoft Corp. (Nasdaq: MSFT).

The move comes only days after Cisco announced the acquisition of network file virtualization startup NeoPath Networks . (See Cisco Nabs NeoPath.)

— Ray Le Maistre, International News Editor, Light Reading

firstmiler 12/5/2012 | 3:12:28 PM
re: Cisco to Buy WebEx for $3.2B I know that Cisco has dabbled around the edges of being a service provider in the past, but this is their first significant stake in the SP landscape.

Will Google/Yahoo/A&T etc. cotton to their strategic pick axe & shovel provider starting to stake claims along side them to establish competitive mining efforts?

Is Disney or Comcast on the M&A horizon for CSCO?

Stay tuned....

krbabu 12/5/2012 | 3:12:23 PM
re: Cisco to Buy WebEx for $3.2B It seems to me that Cisco will be a value-added SP like Google & Microsoft rather than a transport provider like AT&T. This news tells you that this is Cisco's approach to continue to deliver 65% gross margin and to distance itself from Chinese inexpensive hardware manufacturers.
donniall 12/5/2012 | 3:12:22 PM
re: Cisco to Buy WebEx for $3.2B Or maybe this is the first sign that the 'inexpensive' vendors are indeed beginning to hurt Cisco, and finding other sources of revenue is the only way of maintaining/increasing revenues?
materialgirl 12/5/2012 | 3:12:17 PM
re: Cisco to Buy WebEx for $3.2B CSCO bought WEBX for the "disruptive" opportunity it represents. This implies they see a turn in the market, presumably towards rich converged applications. Notably, WEBX does not seem to use CSCO gear in their own network, but rather "over 3000" servers.

It therefore sounds like CSCO thinks CDN-based technology is the future. Sounds bad for pricey routers, doesn't it?
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