Cisco Buys Tandberg To Broaden Videoconferencing Portfolio


Cisco Systems said late Wednesday it had made a recommended voluntary $3 billion in cash offer to acquire Tandberg, the video communications equipment maker based in New York and Oslo.

Tandberg makes a range of video networking hardware and software -- from low-end desktop accessories to top-of-the-line videoconferencing systems -- and will add to Cisco's stake in teleconferencing and collaboration markets, where Cisco is already a recognized player thanks to TelePresence, WebEx and other offerings.

Tandberg's smaller and cheaper products, especially, will give Cisco's teleconferencing portfolio a better midmarket reach.

In a statement, Cisco said it expects the deal to close during the first half of 2010.

"Cisco and Tandberg have remarkably similar cultures and a shared vision to change the way the world works through collaboration and video communications technologies," said Cisco Chairman and CEO John Chambers in a statement. "Collaboration is a $34 billion market and is growing rapidly -- enabled by networked Web 2.0 technologies. This acquisition showcases Cisco's financial strength and ability to quickly capture key market transitions for growth."

According to Cisco, Tandberg CEO Frederik Halvorsen will take the reins of Cisco's new TelePresence Technology Group, and will report to Marthin de Beer, Cisco's senior vice president, Emerging Technologies Group.

"Cisco and Tandberg share a vision of changing the way people communicate and collaborate," said Halvorsen in a statement. "This transaction is a vote of confidence, not just in Tandberg but in our technology and our people. The combination of world-class technologies, Cisco's global scale, and exceptional people from both organizations will enable us to accelerate innovation and market adoption."

Zeus Kerravala, analyst and senior vice president at the Yankee Group, said in a research note Thursday that "it's a surprise they had not bought them sooner" thanks to how Tandberg's product portfolio expands Cisco's reach into videoconferencing and collaboration for a wider variety of businesses.

"Cisco's current strategy includes a telepresence solution -- a high-end boardroom tool not meant for ad hoc communications -- as well as some consumer products, but does not have an offering that satisfies the larger corporate video market," said Kerravala. "Tandberg fills this gap, with solutions that are ideal for enterprise day-to-day communications. This acquisition also complements Cisco's overall collaboration strategy and fits well into Cisco's end-to-end strategy."

Kerravala said the move puts Cisco in greater competition with teleconferencing and video stalwarts like Polycom, as well as Microsoft's video and unified communications portfolio.

Cisco has been on an acquisition tear for the past few years, having bought nearly 40 companies -- from WebEx to Pure Digital, maker of the Flip video camera -- since 2004.

In an interview last week with The New York Times, Chambers said that Cisco had no plans to slow the pace of its acquisitions, and to expect "a lot of acquisitions over the next year."

"We are involved in things that may shock you," Chambers told the Times, touting Cisco's success in moving into more than 30 new markets -- from smart energy grid technology to consumer electronics -- that according to Cisco have the potential to produce $1 billion in revenue each.