Cisco buying Tandberg tipped to shake up UC market

Stuart Corner
Monday, 05 October 2009 02:45

IT Industry - Strategy

Cisco's announcement that it is buying videoconferencing equipment specialist Tandberg will reduce the options for its rivals in the UC and collaboration market  looking for videoconferencing partners.

Cisco announced on 1 October that it would make an all cash offer worth $US3.0 billion for the Norwegian-based Tandberg. Commenting on the deal Moody's Investor Services said: "Although the enterprise videoconference market is competitive, particularly at the lower end, including Polycom, LifeSize, and others as well as potential new entrants such as Skype, Moody's views favourably the complementary nature of the intended Tandberg acquisition and expects Cisco to leverage its long track record, deep understanding of the enterprise market and dominant market positions across numerous network-related segments to further enhance its position in the videoconference market."

Ovum analysts Richard Mahony and David Molony said: "We think this is a smart deal for Cisco. Tandberg has the full toy box for videoconferencing systems. And while Cisco has made a big noise with Cisco TelePresence since it launched in 2006, videoconferencing is much more than big-screen suites – which make up only 25 percent of the market...For the moment the acquisition plugs holes in Cisco's video portfolio and is a land-grab in telepresence, where we estimate the combined entity will have a 65 percent market share. To be more than that – to be a catalyst for change in work and home life – Cisco will need to take its grand video vision and give its customers a broader understanding of the role that video communications and collaboration tools can play in the home and in the enterprise."

On a less enthusiastic note they added: "If there's something unexciting about this deal it is because it is a bit of classic box-buying and not a services acquisition. All of Cisco's product development news is around service architectures and service support, and this isn't. Services account for 16 percent of Tandberg's revenues, and while Cisco CEO John Chambers purred at the near-50 percent service 'attachment rate' in telepresence, that's only at the top end of business video communications. Also, for fellow CEO Fredrik Halvorsen, service attachment is probably a new term; for him service is something that's included in the package. The two will need to sort out what's important here – more box-shifting, or an earth-moving shift to service packages on video."


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