Videoconferencing Consolidation Puts All Eyes On Polycom

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Consolidation in the networking, infrastructure and collaboration spaces is nothing new, but if planned acquisitions by Cisco and Logitech are successful, the videoconferencing space will be a whole new landscape in 2010 -- dramatically different than even a few months ago.

Where that leaves Polycom -- the lone videoconferencing player with the scale to be considered a contender -- is anyone's guess.

Cisco struck first, announcing on Oct. 1 that it intended to acquire Tandberg for $3.1 billion as part of a string of recent acquisitions that's continued unabated for years. It's one of many moves Cisco has made lately to broaden its collaboration and unified communications portfolio and compete with everyone from Microsoft and IBM, to its more traditional networking and UC rivals.

The Tandberg deal was stalled, however, as a group of shareholders collectively representing a 24 percent stake in Tandberg publicly called out Cisco for a lowball offer. Earlier this month, Cisco Chief Strategy Officer Ned Hooper addressed the Tandberg deal in a Cisco blog post, which seemed to indicate Cisco had no interest in raising its offer.

"Our offer price reflects this balance and is based on a simple premise for both sets of shareholders -- fairness and value," Hooper wrote. "Is a 38.3 percent premium fair for Tandberg shareholders? Absolutely. Does it lock in a superior return for Tandberg shareholders and protect them from future market risk? Yes. Does it also fairly reflect risks borne exclusively by Cisco shareholders? Yes."

This week, however, Cisco did an uncharacteristic about-face, and sweetened the Tandberg offer by about $300 million, with the deadline extended to Dec. 1 for Tandberg's shareholder approval. The drama of the move was not lost on observers -- RBC Capital Markets analyst Mark Sue told The Wall Street Journal Monday that, "It's an embarrassing process for a well-oiled machine" -- and further suggests the increasing importance of video as center to a full collaboration portfolio.

With Cisco upping its ante for Tandberg, and Logitech's planned acquisition of LifeSize, Polycom effectively stands alone in videoconferencing, give or take a few point players -- such as New Jersey-based Vidyo -- that specialize in endpoints, or infrastructure pieces, or particular niches.

Is Polycom for sale? Joan Vandermate, vice president of marketing for Polycom's video solutions group isn't saying, although she offered that she "wasn't aware we're entertaining offers" and that Polycom is "excited to be the last one standing." But the implications for video are clear, she said in a recent Channelweb.com interview, and the moves by Cisco and Logitech only further validate the strength of the market.

"Both the Cisco-Tandberg acquisition and the Logitech-LifeSize acquisition are very good signs for our industry," Vandermate said. "These signal -- signal very clearly -- that video is entering the mainstream, finally. Video's been the next big thing for decades, and now, on the horizon, is large-scale widespread adoption. We're clearly getting there. Video will not be relegated to a sidebar, nor to a niche application."

NEXT: Changing Lanes In Video

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