Picture This: Behind Cisco's $3 Billion TelePresence Deal

The VAR Guy thought Cisco Systems was preparing to acquire LifeSize Communications, a tiny but fast-growing provider of video conferencing technology. But apparently the networking giant had much bigger things in mind -- spending $3 billion to gobble up Tandberg.

October 1, 2009

tandberg-cisco-telepresence

tandberg-cisco-telepresence

The VAR Guy thought Cisco Systems was preparing to acquire LifeSize Communications, a tiny but fast-growing provider of video conferencing technology. But apparently the networking giant had much bigger things in mind — spending $3 billion to gobble up Tandberg. It’s an interesting move, especially when compared to Avaya’s bid to acquire Nortel’s enterprise networking business. Here’s some perspective.

Let’s start with Cisco’s ambitions. During Cisco Partner Summit in June 2009, The VAR Guy heard rumblings from multiple sources that Cisco planned to buy LifeSize Communications as part of a push into the low-end telepresence market. Apparently, The VAR Guy was only half-right (how’s that for spin…) Cisco wanted to grow its TelePresence business, but instead has acquired Tandberg for $3 billion to do so.

Here’s a video with Cisco Systems CEO John Chambers and Tandberg CEO Fredrik Halvorsen, explaining the deal. Sure, there’s a lot of feel-good chatter between Chambers and Halvorsen. But heck, The VAR Guy appreciates a window into the deal:

The VAR Guy’s Spin

The move comes at an interesting time for network integrators and solutions providers.

In addition to focusing on enterprise telepresence, Cisco plans to push into small business and even consumer settings. At the same time, rivals like Hewlett-Packard have been introducing low-cost, PC-centric video conferencing offerings. (Example: Check out HP SkyRoom.) Meanwhile, the traditional networking market is consolidating as Avaya tries to finalize its buyout of Nortel’s enterprise business.

There’s logic behind the consolidation. Back on Sept. 9, The VAR Guy told readers there was no way Cisco would bid on Nortel’s enterprise assets. The reason: Cisco focuses on growth-oriented acquisitions, rather than mature industry consolidation deals. Avaya, in stark contrast, bid for Nortel’s enterprise business to buy some market share and account control.

Cisco-Tandberg

The Cisco-Tandberg deal has already promoted speculation that Polycom will seek or attract a buyer. But The VAR Guy wonders: Would it be wiser for someone to place a bid for fast-growing, privately held Lifesize? Hmmm…

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