WebEx Communications Inc. officials said it would use a portion of its $220 million in cash reserves to pay for the buyout of Intranets.com, which is based in Burlington, Mass.
The acquisition price for the 80-employee company represents about three times Intranets.coms annual revenue, company officials said.
Both companies are "pioneers and leaders in the software as a service business," said WebEx CEO Subrah Iyar.
WebEx provides an online conferencing service that lets users set up training sessions, product demonstrations, marketing presentations or business meetings for employees in remote offices.
Iyar noted that the software as a service model has allowed both companies to offer their products to companies of all sizes.
Intranets.com in particular, was able to allow small and midsize companies to acquire collaboration and document-sharing applications that were affordable mainly by larger enterprises with significant IT budgets.
"Intranets.com brings a rich set of new capabilities. They have a proven business model for small business and add capabilities for team collaboration project management and partner coordination," Iyar said.
The Intranets.com applications include document sharing, group scheduling, task management, discussion forums and contract directories.
The Internet has allowed Intranets.com to reach SMB (small to midsize business) companies that that were missed by the marketing methods historically used by enterprise software vendors, noted Rick Faulk, Intranets.com CEO.
"In the last few years, [Intranets.com] has used the Internet to fundamentally change the dynamics of selling in a small business market. We have learned how to acquire customers, deliver a product and provide support via the Web," Faulk said.
"Weve also found that our sales, marketing and channel strategies to reach these small businesses works quite well in markets outside of North America," he said.
The merger with WebEx will provide the resources and momentum to allow the combined companies to take advantage of a market that should grow rapidly, he said.
"When you take into consideration the rapid adoption of high-bandwidth Internet connections by business worldwide and add to that the strong business dynamics and compelling value proposition, its easy to see that the market for on-demand collaboration products is poised for growth," said Faulk.
After the WebEx completes the acquisition by the end of the third quarter, Intranets.com will become a wholly owned subsidiary of the parent company.
The acquisition will not require the U.S. Securities and Exchange Commissions review or approval, company officials said.
Intranets.com has more than 300,000 subscribers at 10,000 corporate sites.
The acquisition will allow WebEx to expend its services deeper into the collaboration market beyond its core conferencing service.
"Together our offerings are substantially enhanced. This should give us the opportunity to unlock the potential of new markets, especially the small-business market," Iyar said.
Under the terms of the sale agreement, a portion of the purchase price will be held back to ensure that Intranets.com will meet certain performance warranties and that it will be smoothly integrated with the WebEx, company officials said.
WebEx estimated the acquisition will add between $3 million to $5 million to the publicly traded companys total revenue by years end.
The company is estimating that its 2005 revenue will total between $303 million and $315 million.