Cisco can either up its bid or walk away, said Roopam Jain, an analyst with Frost & Sullivan, adding that it would make more sense for the company to raise its offer.
"Tandberg's addition to the Cisco collaboration portfolio offers multiple synergies and advantages for Cisco's long-term collaboration vision," Jain said in an e-mail. "There has been a positive response to Cisco's announcement of its intention to acquire Tandberg, and walking away will cause some confusion in the minds of investors.
"We see Tandberg [as] a great fit for Cisco and so it's most likely that Cisco will dig deeper and up their bid."
Cisco officials are keeping mum on the issue, citing the tender offer process. However, in a statement, Cisco officials reiterated that they believe "we are paying a fair price for a quality asset and our offer comes recommended by the Tandberg Board of Directors."
Tandberg officials could not be reached for comment.
Cisco Oct. 1 announced its $3 billion bid for Tandberg, which makes video conferencing equipment. Twenty-one shareholders holding 24 percent of Tandberg stock rejected the Cisco offer Oct. 15. SEB Enskilda, a Swedish brokerage representing them, said the shareholders believe the offer undervalued Tandberg, and said they were comfortable keeping the company independent if a higher bid from Cisco or a third party didn't materialize.
In their statement, Cisco officials said Cisco's offer represented a 38.3 percent premium to shareholders based on the closing share price on July 15, the day before rumors of a possible deal circulated among media outlets.
However, things changed during the past three months, according to Jain. The offer represented an 11 percent premium based on the stock price before the deal was announced, she said, a smaller premium than Cisco has offered for other companies, including WebEx and, more recently, Starent Networks.
"This bid is widely being considered as a 'great deal' for Cisco," Jain said. "Tandberg is the revenue market leader in the high-growth video conferencing market and has a solid product line that offers significant synergies for the Cisco portfolio."
Tandberg also released strong third-quarter financial numbers Oct. 15, with a 11.6 percent jump in revenue and 10.2 percent hike in profits.
Cisco officials have targeted video conferencing as a key market. Tandberg offers a variety of products, including some aimed at the smaller businesses, an area in which Cisco wants to expand. Tandberg Oct. 14 unveiled its T1 offering, part of its Total Telepresence line of video conferencing products and a complement to its T3, which was released earlier in 2009 and targeted at larger companies.
Video conferencing is getting more attention from businesses looking to reduce travel expenses and reduce their impact on the environment.
Jain said there always is the possibility of a third party jumping into the bidding process, but that would be a surprise. Avaya has been mentioned as a possibility, but the company currently is dealing with the work involved in its acquisition of a large chunk of Nortel Networks' business.
"Avaya's hands are full and another large acquisition could cause some serious integration challenges for Avaya," she said. "We think [Hewlett-Packard] and Microsoft can be possible bidders, too, but at this point, each of these two companies does not seem to have a well laid-out end-to-end video strategy like Cisco."