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Tandberg Deal Boosts Cisco's Video Plans

Cisco's video ambitions hit the big time, as Tandberg reaches a mainstream market missed by Cisco's premium TelePresence kit

Craig Matsumoto

October 1, 2009

2 Min Read
Tandberg Deal Boosts Cisco's Video Plans

Could Cisco Systems Inc. (Nasdaq: CSCO)'s Tandberg ASA (OSE: TAA) acquisition be the thing that solidifies TelePresence as a mainstream enterprise tool?

Cisco's $3 billion cash deal, announced today, has it paying an 11 percent premium over Tandberg's stock price yesterday. The acquisition will be subject to the usual regulatory approvals. (See Cisco Bets $3B on Tandberg .)

Dig this: Tandberg is Cisco's biggest acquisition since WebEx ($3.2 billion) in 2007 and Scientific Atlanta ($6.9 billion) in 2005. (See Cisco to Buy WebEx for $3.2B and Cisco to Acquire Scientific-Atlanta.) By the size alone, the deal indicates how seriously Cisco is taking video-based enterprise services.

"They put their money where their mouth is, that's for sure. They've been talking about how video has been taking off in the enterprise," says Nick Lippis, principal analyst with Lippis Enterprises .

Indeed, Cisco ended 2008 declaring that video would be a huge part of its future. (See Cisco's Video Transformation , Cisco's Video Blitz, and Cisco Revs Its Video Engine.)

Cisco's TelePresence was crafted as an elite product, requiring dedicated network connections. Cisco even consulted with customers on wall colors for TelePresence rooms. (See Cisco Dials Up Videoconferencing.) Scaling all that into a mainstream videoconferencing product was going to be difficult, says Zeus Kerravala, analyst with Yankee Group Research Inc. .

"They've been dabbling in video with the Flip acquisition and TelePresence, but those are pretty nichey products," Kerravala says. (See Cisco's Latest Buy: Flippin' Sweet.) "I think of TelePresence as a tool that needs to be scheduled. What Tandberg has can be used more ad hoc."

But unlike Flip -- "Flip, I still don't get," Lippis says -- Tandberg might find a good, quick fit with Cisco's enterprise portfolio. Lippis sees videoconferencing being a good adjunct to WebEx's conferencing and Cisco's unified communications suite.

"When you own all three of those together, you get a portfolio in real-time collaboration that is unmatched by anybody in the industry," Lippis says. "That is what a lot of the industry is starting to wrap their minds around: How do we do a lot of real-time collaboration?"

Separately, the deal could also cause some rifts in each company's partnerships. Cisco was the biggest customer for Radvision Ltd. (Nasdaq: RVSN), a Tandberg competitor that now seems out in the cold. (See Cisco Socks Radvision.) And Tandberg had partnerships with HP Inc. (NYSE: HPQ) and Microsoft Corp. (Nasdaq: MSFT), which are "not at the top of Cisco's fan club," Kerravala says.

— Craig Matsumoto, West Coast Editor, Light Reading

About the Author(s)

Craig Matsumoto

Editor-in-Chief, Light Reading

Yes, THAT Craig Matsumoto – who used to be at Light Reading from 2002 until 2013 and then went away and did other stuff and now HE'S BACK! As Editor-in-Chief. Go Craig!!

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