Recent maneuvers by networking bigwigs Cisco and Logitech seem to indicate that videoconferencing technology may be headed towards the mainstream market. That hasn't been the case up to this point, as high prices and somewhat complicated equipment have relegated virtual face-to-face meetings to enterprise applications.
But that's rapidly changing. Cisco, Logitech, and a handful of smaller companies have been wheeling and dealing with a focus towards morphing the market into a mainstream gold rush. Cisco, for example, increased its $3 billion bid for Tandberg to roughly $3.4 billion in an attempt to entice investors who felt that the original bid wasn't enough. In addition, Cisco is expected to introduce a consumer-level videoconferencing product at CES this January, Businessweek reports.
Logitech meanwhile has opend up its purse and will pay $405 million for LifeSize Communications, a company which makes high-end HD videoconferencing equipment.
By themselves, each deal isn't particularly telling, but when looking at the overall picture, it appears imminent that videoconferencing is headed towards becoming a natural part of business, both big and small, with the cost of entry on its way to being removed as a barrier.
How seriously does Cisco want to acquire Norwegian video conferencing firm Tandberg? Serious enough to increase its original takeover offer by another $390 million.
"The new offer represents the offeror's final price for this transaction," Cisco said, adding that it will withdraw the offer if it doesn't achieve the desired 90 percent level of acceptance, the Wall Street Journal reports.
In early October, Cisco offered to buy Tandberg for a little under $3.1 billion, which already represented an 11 percent premium to Tandberg's share price. Cisco said it was a "fair price" for the firm and hinted that it might walk away from the deal if not approved, but several minority shareholders disagreed and ultimately rejected the original offer.
It's believed that the new offer will probably be accepted, which already has the support of several bigger shareholders.
"We continue to believe that Cisco and Tandberg share a vision of changing the way people communicate and collaborate, and that 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," said Fredrik Halvorsen, Tandberg Chief Executive.
Videoconferencing firm Tandberg was all too happy to accept Cisco's $3 billion buyout offer back at the beginning of October, but at least two investment consulting companies say Cisco's bid undervalues the firm.
The only opinions that matter at this point are those of the Tandberg's shareholders, who have yet to approve the deal. Before the agreement can go through, owners of 90 percent of the company's shares have to give it the green light, and do so by the end of the day today. There's been talk that holders of 24 percent of Tandberg stock don't plan on signing off on the deal, and should that happen, Cisco has hinted it would walk away rather than raise its offer.
"We believe we are paying a fair price for a quality asset, and our offer comes recommended by the Tandberg Board of Directors," Cisco said in a prepared statement. "Further, Cisco's general approach to M&A activities is that no acquisition should be pursued or completed if it runs counter to the broader principles of prudence and financial fairness."
But not everyone agrees with Cisco's assessment. Consultants from Panta Capital and Scott & Associates contend that Tandberg's third quarter financial results beat the consensus estimates of analysts for revenue and profit, and Cisco's offer simply isn't enough.
Maybe the economy is recoverying after all, or so analysts are saying after Cisco reported fiscal first-quarter earnings that nudged ahead of expectations and showed strong sequential growth.
The network security firm reported a quarterly profit of $1.8 billion, or 36 cents a share. That's down from last year, when Cisco posted a profit of $2.2 billion, or 42 cents a share, but up from last quarter. Revenue for the first fiscal quarter climbed to $9 billion, which is more than the $8.75 billion analysts had expected.
"Our ability to launch four proposed acquisitions, the ecosystem-shifting coalition with EMC/VMware, and five new products and industry solutions into the Cisco pipeline in the past few months alone underscore this momentum," said John Chambers, Chairman and CEO of Cisco. "Our build – buy - partner innovation engine is clearly running on all cylinders, while our operational machine is pulling costs out of the business even as we scale new models for growth. Execution and results over time will demonstrate the long-term impact of this vision and strategy— but a new model of productivity based on collaboration is clearly emerging and we believe this may be the most profound opportunity for businesses in our 25 years as a company."
Cisco has been on a spending spree as of late, having recently agreed to purchase Starent Networks for a cool $2.9 billion and ScanSafe for $183 million.
Citing anonymous sources "familiar with their plans," Reuters reports that Cisco and storage area networking company EMC will work together to bring a new line of products to market dubbed vBlock. The new line will consist of cloud computing gear, including networking equipment, computers, and storage devices.
Cisco and EMC both declined to comment, but according to the talkative sources, the two companies will assemble computer systems for customers, which will also include all the necessary software.
"It's a 'virtual block' of the data center. You can buy it from them as a service, then eventually transition it to your own data center," said one of the people familiar with the plan.
Should the rumor turn out to be true -- and there's reason to believe it is, given that this isn't the first time the two have been linked in plans to jointly develop could-based solutions -- it will turn the heat up on rivals IBM and Hewlett-Packard, both of which offer a wider selection of data center equipment.
Cisco today announced its intent to acquire ScanSafe, a privately held software-as-a-service (SaaS) Web security outfit based in London and San Francisco.
Under terms of the agreement, Cisco will pay $183 million in cash and retention-based incentives for the security firm. ScanSafe's services will be integrated with Cisco AnyConnect VPN client, but that's not all ScanSafe brings to the table. Cisco will also have access to the security firm's global network of carrier-grade data centers and multi-tenant architecture, both of which will help boost Cisco's presence in cloud security products.
"With the acquisition of ScanSafe, Cisco is executing on our vision to build a borderless network security architecture that combines network and cloud-based services for advanced security enforcement," said Tom Gillis, vice president and general manager of Cisco's Security Technology Business Unit (STBU). "Cisco will provide customers the flexibility to choose the deployment model that best suits their organization and deliver anytime, anywhere protection against Web-based threats."
Cisco added that it expects Web security to be a $2.3 billion market by 2012, which would explain the company's aggressive spending as of late. Earlier this month, Cisco bid a whoppng $3 billion for Norwegian video conference company Tandberg and agreed to pony up $2.9 billion to acquire wirless equipment maker Starent Networks.
Cisco today announced it has agreed to fork over $2.9 billion to acquire Starent Networks Corp., a Massachusetts-based company who makes equipment that allows carriers to tie their wireless networks to the Internet.
"We are very pleased that Starent Networks will be joining the Cisco team, and we believe their products and engineering talent will greatly benefit our Service Provider customers as they build out their Mobile Internet offerings," said John Chambers, Chairman and Chief Executive Officer.
Under terms of the agreement, Cisco will pay $35 per share in cash for each share of Starent Networks, which represents a 21 percent premium to Monday's closing price of $29.03. In addition, Cisco will also assume outstanding equity awards.
Starent has already accepted the offer, however the deal is subject to closing conditions and regulatory review. Barring any unforeseen complications, Cisco expects the deal to close during the first half of 2010.
WiMAX provider Clearwire has expanded its Silicon Valley network to cover the Google and Intel campuses. This development is a long time coming as the two tech behemoths are principal investors in Clearwire. Cisco is another partner and expects to have Clearwire coverage soon. Everyone else in the San Francisco Bay Area can expect the 4G service at some point in 2010.
The service is capable of up to 10 Mbps down, with an average of around 3-6 Mbps. That’s probably a few times faster than any 3G wireless data service you’ve used in the US. Leading up the public launch, select developers will be given free access, provided they live or work in the so called "Innovation Network" coverage area. They need only purchase a $50 USB modem. Certainly a good deal if you’re a developer who wants to work with WiMAX. So, how much would you pay for WiMAX service like this?
According to Cisco, global IP traffic will skyrocket to a zettabyte -- or one trillion gigabytes -- by 2013, which is more than five times the amount of traffic today. Consumer IP traffic will account for a whopping 90 percent of the total, the company says.
Cisco also sees video leapfrogging mobile data traffic in the next four years, growing from 33 petabytes a month in 2008 to 2,184 petabytes (or 2 exabytes) a month in 2013. If true, that would mean mobile video would see a 131 percent annual growth rate.
Cisco, who bought the maker of the Flip video camera, certainly has a vested interest in seeing online video playing a bigger role, but potentially standing in the way of such a future is the increasing prominence of consumption based billing among ISPs. The future of broadband billing hasn't yet been decided as several ISPs continue to test market tiered consumption models.
It's been rumored that Cisco would move into making its own blade servers, and that rumor turned into a reality last week when the company accounced its Unified Computing effort. A bevy of press releases related to the effort were released by Cisco last Monday, which has the company aiming to unify components of the data center into a single footprint and cut both ownership and operating costs.
The company's new Nehalem-based blade servers have been in design and development for two years and spells bad news for HP, who Cisco has dead in its sights.
"We're going to compete with HP," said Padmasree Warrior, Cisco CTO. "I don't want to sugarcoat that. There is bound to be change in the landscape of who you compete with and who you partner with."
Cisco's blade launch includes partners like BMC, EMC, VMWare, and Microsoft.