This morning Cisco announced a $3 billion bid to acquire videoconferencing vendor Tandberg. Cisco will reportedly make an official bid sometime next week, after which Tandberg stockholders have 20 days to accept or reject the offer. Given Cisco's offer is approximately 25% over Tandberg's recent average stock price, it's likely that barring any last minute challenges, Tandberg shareholders will accept the bid. Cisco expects the deal to close in 1H10 and has already announced plans for a new video focused business unit reporting to the current CEO of Tandberg.On September 16, I wrote that the acquisition of Nortel by Avaya was a prelude to further consolidation; little did I realize that my prediction would come true so quickly! While there have been rumors floating around for several months of a potential suitor for Tandberg, Cisco's move further signals growing industry consolidation, again due to the slowing of IT investment as a result of the global recession.
For Cisco, this acquisition makes sense on several levels. Video conferencing reflects perhaps the one area within unified communications that is still seeing strong growth, with 53% of companies using desktop video, 78% using room-based systems, and 28% using telepresence. IT managers continue to see increasing utilization of video deployments, along with growing demand for video recording/streaming capabilities, integration with existing systems, and external connectivity to support extranet conferencing.
Cisco gains Tandberg's extensive portfolio across all market segments and gets its own gateways and MCUs already optimized for HD as a result of Tandberg's previous acquisition of Codian. Cisco also gains Tandberg's extensive vertical solutions focused on areas such as medical and education. Finally, Cisco gets Tandberg's services business, management products, and wireless gateways. Perhaps the biggest question is the future for Tandberg's T3 telepresence suite, positioned as a direct competitor to Cisco's own TP offering. Cisco has far larger telepresence market share, but Tandberg has made some innovations in integrating collaboration applications, reducing power consumption, and delivering multi-vendor interoperability with Polycom TPX/RPX and HP Halo Collaboration Suite.
Tandberg's competitors face a drastically different marketplace. Polycom now stands alone as the only other video vendor with a full-suite of products, from desktop to telepresence to managed services. It's likely we'll see Polycom move closer to both Microsoft and Avaya to deliver a complete competitive UC offering offering voice, video, and presence-enabled applications to compete with those from Cisco. Radvision faces the potential loss of a substantial part of its OEM business. Smaller vendors such as Avistar, LifeSize, and Vidyo are increasingly likely targets for acquisition. HP, curently a Tandberg partner, faces the loss of a key channel.
From the enterprise side this is good news for both Tandberg and Cisco customers as they will see greater integration of products and a more complete product line from both vendors, not to mention more aggressive pricing from competitors anxious to offer an alternative solution.
The M&A train has left the station and is gaining steam, it will be interesting to see which station it stops at next.
