Cisco Eyes Subscription Business With WebEx Buy

Over the longer term, Cisco aims to integrate its VoIP and IP video technology, including its TelePresence high-definition videoconferencing, with the WebEx environment, he said. And in the near term, the companies will benefit from complementary distribution strategies.

Subrah Iyar, CEO of WebEx, agreed. "From a distribution perspective, our service is proven in the market. We have presence in the SMB, of course, in enterprises and globally. But our enterprise presence is only 20 percent at the present time, and our global presence is also under 20 percent," Iyar said. "With Cisco's strong distribution capabilities, we can drive [our service] all over the market, and we are proud to be able to support Cisco's progress into the SMB market with our channels."

Solution providers lauded Cisco for pursuing the deal.

"I just knew it was a matter of time before WebEx got scooped up. Their technology is very robust," said Melissa Rangell, vice president of marketing at CT Networks, a Cisco partner in Hauppauge, N.Y. "It's a smart move."

Adam Eiseman, CEO of Lloyd Group, a Cisco partner in New York, said the acquisition complements Cisco's TelePresence technology, which he had just seen demonstrated a few weeks ago. "It goes along with what they're trying to do," he said.

Under the terms of the acquisition, expected to close in Cisco's fiscal fourth quarter, the networking giant will make a cash tender offer to buy all outstanding WebEx shares for $57 per share, for a total purchase price of about $3.2 billion. The deal nets out to $2.9 billion after factoring in WebEx's current cash balance.

Shares of WebEx closed at $46.20 on Wednesday and traded at $56.43 Thursday afternoon. Shares of Cisco traded down 3 cents at $25.81 Thursday afternoon.

The acquisition will be Cisco's largest since spending more than $7 billion to acquire set-top box maker Scientific-Atlanta in February 2006. Other Cisco acquisitions under way or completed this year include e-mail security vendor IronPort, XML gateway provider Reactivity, the two social networking companies, and storage virtualization player NeoPath Networks in a deal announced earlier this week.