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Cisco’s acquisition of video communications vendor TANDBERG for $3 billion, subject to shareholder approval and regulatory review, significantly strengthens its position in the burgeoning enterprise collaboration space. TANDBERG’s video conferencing solution set is a highly complementary addition to the Cisco collaboration portfolio, which now gains a comprehensive range of business video endpoints.

TANDBERG, alongside chief competitor Polycom, has long been a dominant player in the business video conferencing space, with standards-based endpoints that extend from desktop units to mid-sized and large meeting room systems. The vendor is Cisco’s latest in a series of video-related acquisitions, following set-top box provider Scientific-Atlanta in 2005, online conferencing vendor WebEx in 2007, and Flip Video camcorder maker Pure Digital in early 2009.  

The acquisition is a natural fit for Cisco, which has made no secret of its ambitions around video but to date has not presented a competitive video endpoint lineup. Notwithstanding successes at the upper end of the market with its TelePresence portfolio – high-definition virtual meeting solutions aimed at the executive set – Cisco has lacked offerings for the larger audience of mid-sized and small enterprises. This also includes enterprises operating with greater resource constraints that are evaluating video but simply cannot justify a higher-end Cisco deployment.

Jayanth Angl, senior research analyst for Info-Tech Research Group, said that the acquisition of TANDBERG is a bold move but one that makes good sense for the vendor as it continues to expand its collaboration portfolio.

“Cisco can now present a compelling video collaboration story for a broader customer base, while continuing to draw on its infrastructure strengths,” said Angl. “By adding the products to back up its considerable mindshare, Cisco can make it difficult for others in the communications space when it comes to video.”

However, Angl notes that video is just one element of the Unified Communications roadmap for most organizations, and enterprises can still choose from a number of standards-based solutions from competing vendors. Further commoditization in the space may also limit the benefits Cisco sees from its multi-billion dollar purchase.

At a technical level, Angl does not see integration being an issue. He points out that many enterprises already operate Cisco and TANDBERG equipment alongside each other, and the two vendors have also partnered on combined video and telephony solutions in the past.

Speculation that TANDBERG, which reported 2008 revenues of over $800 million, would be acquired by a larger entity has persisted for several months. The most discussed of potential suitors was Silver Lake Partners, the private equity firm that is a co-owner of Avaya, Cisco’s key competitive threat in the IP telephony space. However, with Avaya’s pending acquisition of Nortel Enterprise Solutions for $900 million, the door was opened for Cisco.

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Search Code: 12159
Published: October 2, 2009
Last Revised: October 2, 2009

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