Cisco Offers $3 Billion for Tandberg in Enterprise Video Play

By Clint Boulton  |  Posted 2009-10-01

Cisco Oct. 1 agreed to acquire video conferencing rival Tandberg for $3 billion in cash, the latest move in the networking giant's hungry push in the collaboration market.

The bid is an 11 percent premium over the Sept. 30 closing price of Tandberg's stock, and a 25 percent premium over the three-month average closing price for the Norwegian company. The premium purchase in a relatively lackluster economy underscores the importance Cisco places on video for enterprises.

Tandberg is a leading maker of "video endpoints and network infrastructure," or computer servers and software that help large businesses shuttle video to their employees over the Internet. Cisco is also a major provider in this space, focusing on telepresence, which allows employees to conduct face-to-face meetings through computer and television screens, leveraging video carried over the Web.

Enterprise executives use technology from Tandberg and Cisco to broadcast live messages to thousands of employees. Corporate employees use solutions from these vendors to hold video conference meetings with colleagues located worldwide in remote offices.

While Cisco sells its video conferencing technology to larger businesses, Tandberg  also offers gear to medium-sized businesses and makes software for managing video conferencing systems.

Cisco Chairman and CEO John Chambers said on a conference call today that Tandberg does an "amazing job" selling to these mid-level businesses and delivering video to desktops.

"When we began to look at this combination, we saw an opportunity to hit a tipping point in the collaboration market," Chambers said, noting that Tandberg marks Cisco's first bid for a publicly traded company outside the United States.

Yankee Group analyst Zeus Kerravala said he was surprised Cisco had not bid for Tandberg sooner, noting that Cisco's current telepresence software is not meant for ad hoc communications. With Tandberg, Cisco will be able to satisfy the larger corporate video market.

Cisco believes enterprise video tools are a cornerstone of the $34 billion collaboration technology market.

The company started this march in 2006, when it acquired IP TV provider Scientific Atlanta for $6.9 billion, and then went on to acquire Web conferencing specialist WebEx for $2.9 billion in 2007. Cisco this year also bought Pure Digital, maker of the popular Flip handheld video recording device.

In buying Tandberg, Cisco is removing a rival and strengthening its own video infrastructure offerings.

Cisco expects to complete the acquisition, recommended unanimously by Tandberg's directors, during the first half of 2010. Should the deal close, Cisco will integrate Tandberg's technology into its own telepresence portfolio.

Tandberg CEO Fredrik Halvorsen will lead the new TelePresence Technology Group, reporting to Marthin De Beer, senior vice president of Cisco's Emerging Technologies Group.  

Cisco did not specify how many Tandberg employees it would retain, saying only in a statement that the company's 1,500 employees "will be extremely important as Cisco's team continues to drive video innovation and growth."

Read more about this acquisition on TechMeme here

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