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Reorg complete, Cisco hops back on the acquisition trail

Stacey Higginbotham — Wed, 08 Feb 2012 22:58:10 +0000

Cisco, an incredibly active acquirer, is ready to start doing deals again, according to CEO John Chambers on the networking company’s financial results call on Wednesday afternoon. Chambers said, “We expect to be more active with acquisitions,” and the company will focus on its five core areas of focus.

Those five areas are switching and routing, the data center, collaboration, video, and architectures for business transformation. In the past year Cisco has done six acquisitions, with half of those occurring in the past three quarters while it was handling its restructuring. As we have documented, Cisco’s previous forays into M&A have helped the company spread its bets on emerging technology around, but they haven’t always helped it boost its bottom line. Cisco also had seemed to lose focus in previous years, letting other firms come into its market and take share.

Based on the financial results at the end of Cisco’s fiscal second quarter of 2012, the company has $46.7 billion available in cash and cash equivalents. It is profitable and is generating cash as well after completing its reorganization, which has cut $1 billion off its annual run rate. In response to questions about M&A strategy on the call, Chambers said that the acquisition strategy remains the same, buying companies with about 100 engineers and products close to coming to market that Cisco customers tell the company it should buy. He pointed to the acquisitions of Tandberg and Starent as good examples of deals and said that of all the large players out there making acquisitions only Oracle had a similar success rate as Cisco when it came to integrating deals.

If Cisco is back in the shopping mood, we have a few suggestions for places where it should start. It should go all-in on the cloud, which seems like where Cisco wants to focus anyhow.

Since software-defined networks and OpenFlow are clearly an emerging area in the networking space, Cisco should shell out money for a player in this space. Big Switch would be a good bet, as it is trying to create an ecosystem using open-source controllers and then focusing on building services and applications on top of that platform. The model is different for Cisco, but the focus on enterprise applications and services is one that would benefit Cisco and lead to higher margins.

As clouds are deployed, monitoring and tracking websites and application performance from within the network are important for Cisco and its enterprise clients, which is why New Relic could also be a good pick for the company. New Relic’s SaaS-based software monitors performance and tracks issues back to the data center to help enterprises or website owners pinpoint bottlenecks and problems.

If Cisco wants to go big, my colleague Derrick Harris suggests that NetApp might be a good buy, because it reduces Cisco’s reliance on EMC, a relationship that is rumored to be on the rocks. If it is not NetApp, any storage vendor with a strong virtualization story and promise in the enterprise would help bolster Cisco’s burgeoning server division as well as its storage networking lineup.

Given the array of startups bringing both intelligence and performance improvements to different areas of the network, there are plenty of opportunities for Cisco to pick up new customers, technology and market share by buying a startup or established company. Who do you think Cisco should snap up?

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Fuze Telepresence Connect hopes to solve interoperability woes

Simon Mackie — Wed, 15 Jun 2011 19:00:42 +0000

One of the major drawbacks with traditional room-based telepresence installations is that systems from different vendors are typically incompatible with each other, and also may not work with other video conferencing endpoints, such as desktop and mobile video conferencing tools. These walled gardens are a problem for a few reasons: They lock customers to a particular vendor; they reduce the possibility of business-to-business telepresence; and they limit telepresence usage only to those employees who can physically access a telepresence room, which isn’t great for remote workers.

Video conferencing and online meeting provider FuzeBox announced a new product Wednesday, Fuze Telepresence Connect, which hopes to overcome these interoperability problems by enabling its Fuze Meeting product to act as a gateway between Tandberg, Polycom and LifeSize telepresence systems. It can also extend telepresence across iPads, Android tablets, PCs and Macs, making it available to an entire workforce.

Telepresence Connect offers:

Scalable multiparty HD video conferencing. High resolution and high frame rate encode and decode at multiple frame rates and resolutions.
Standards-based encoding technology. H.264/AVC/SVC based.
Error resilience and localization. Maintains continuous high-quality video without broken pictures or other artifacts in environments with high packet loss, while individual client network errors do not affect other conference participants
Resolution and rate matching. Supports sending video to multiple endpoints with different bandwidths and resolution capabilities, without transcoding.
Dynamic rate control. Automatically and continuously senses the current network condition and adjusts bit rates accordingly
Firewall/NAT traversal. Embedded functionality that provides a safe and secure connection through any firewall with no feature loss and no additional equipment required.

I’ve seen a demo of Telepresence Connect in Fuze Meeting, and it was impressive, enabling connection to and switching between several telepresence rooms, as well as simultaneous desktop HD video conferencing with several participants. It also provides access to Fuze Meeting’s built-in collaboration tools, such as file viewing, annotation and screen sharing. The seamless connection to various telepresence rooms was particularly pleasing, as typically setting up a telepresence meeting session is not straightforward. I also liked the intuitive Fuze Meeting interface, which enables users to determine the layout of the conferencing screen, choosing which video feeds to highlight or bring to the front — something that’s not usually possible in MCU-based telepresence conferences.

FuzeBox’s new product is not the only cloud-based gateway that can connect telepresence systems. Vidtel, used by the MondoPad device I wrote about last week, also claims to offer “any-to-any” HD video conferencing, for example. However, Fuze Meeting with Telepresence Connect is the only product that works across H.323, SIP and H.264 and can also connect to tablet devices as well as PCs and Macs, and is also the only product to have built-in, easy-to-use conferencing and collaboration tools. Installation of Fuze Telepresence Connect starts at $18,000, with 20 percent annual maintenance fees. That may sound expensive, but it is pretty small compared to the investment required for a typical telepresence setup.

A potential issue for FuzeBox’s new product is the effort vendors are now making to improve interoperability themselves, with most new gear now adhering to either the TIP or H.323 standards, while Cisco, for example, announced an update to its TC and CTS software Tuesday that will be available later this year and extends interoperability with all standards-based endpoints. So has FuzeBox’s product come too late to market? I don’t think so; the telepresence vendors have been sluggish in their attempts to improve interoperability and there are plenty of existing, legacy telepresence installations out there that companies would like to squeeze more usage and life out of.

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Using Dedicated “Media Rooms” for Improved Collaboration

Amber Singleton Riviere — Thu, 19 May 2011 15:00:20 +0000

In recent months, I’ve increased my usage of video and multi-media presentations and conferencing, both for collaboration with external business contacts and for internal product development.

Not long after starting to use these technologies on a regular basis, I decided I needed a better and more-permanent setup in order to remain productive and comfortable, while also being able to shift quickly and seamlessly from one activity to another. Otherwise, I was constantly rearranging my work space to fit the task at hand and spending as much time setting up for a given activity as I was actually completing it.

The Case for a Dedicated Media Room

Many companies today with distributed workforces are making dedicated “media rooms” an important aspect of communication, one that allows workers separated geographically to engage in dynamic conversations, as if they were in the same room and without having to spend time setting up equipment.

Lew Epstein is a general manager at Steelcase, one company providing such working environments. Steelcase’s “media:scape rooms” are dedicated meeting areas that use furniture and technology to create collaborative work spaces for distributed teams. Epstein says that “teams need to share complex ideas [and] solutions that enable them to connect quickly and globally. They want to share content on their laptop or get up and write or draw on a whiteboard, and they need all the subtleties of face-to-face communication, too. For true collaboration, groups need spaces that nurture the process of collaboration. Work is not defined by what you do at a desk, and organizations are no longer confined within office towers. Teams need comfortable, versatile collaborative spaces to work in.”

Tandberg, now part of Cisco, is another company that provides such solutions for face-to-face communication or, as the company refers to them, “telepresence environments.” While these spaces require considerable investment, they can provide companies with cost savings and create greener organizations by cutting travel.

Creating a Media Room

The options for setting up a media space are as varied as the companies that use them. Overall, you’ll want to make sure your solution provides a seamless way to share information, audio, and video so that your team can easily connect and engage with one another remotely, but here are a few other considerations to make when planning your media room or space:

Think about how your team currently collaborates and how you might improve remote meetings and presentations.
Decide if you need a dedicated room is required, or if whether you can integrate your media space within your current office or meeting area.
Decide if you’ll be conducting calls with multiple parties at either end or with just one person.
Think about whether your solution needs to be portable or if it will be set up as a permanent point within your office (some HD telepresence units are now reasonably portable).
Consider the types of content you will share within your presentations and meetings.

In the end, a dedicated media space allows a distributed workforce to collaborate and share information from anywhere in the world quickly and easily, saving time and money, while increasing the effectiveness of global communication.

Image courtesy Steelcase

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Report: The Enterprise Videoconference Landscape, 2010 – 2015

lisampierce — Mon, 16 Aug 2010 07:00:59 +0000

Enterprise use of real-time videoconferencing is on the verge of explosion. A short but critical list of demand and supply side factors have converged to fuel unprecedented rates of adoption of a wide spectrum of technologies in this sector. Even so, a rosy future for the industry is not necessarily assured, and several critical factors retard growth. This report examines these enablers and retardants of the adoption of a wide spectrum of current generation videoconferencing solutions, and offers recommendations to enterprises looking for opportunity in this sector.

Why Juniper's Polycom Partnership Is Destined to Fail

Stacey Higginbotham — Mon, 25 Jan 2010 16:06:07 +0000

Juniper Networks said today that it would team up with videoconferencing gear maker Polycom to form an alliance to deliver videoconferencing products that would ensure a quality experience. The products and services associated with this alliance will come out the middle of this year.

This is clearly a partnership made to ensure that Cisco‘s move into the enterprise video conferencing space doesn’t go unchallenged. Gear from this alliance will be designed for providers offering videoconferencing services. Also as part of the partnership, Juniper routers will detect a Polycom video link and allocate the optimal bandwidth for it in real time.

When Cisco said it would buy Tandberg, a Polycom rival, for $3 billion last year, we explained why it had reason to move deeper into the middle market for video conferencing. However, I’m not sure that Juniper and Polycom are an ideal match, mostly because tying the product to the networking gear is a strategy that ultimately follows along with Cisco’s aims. As a smaller rival to Cisco, Juniper can’t win by playing by the same rules as the larger company — it needs to break them.

Cisco is tying its networking expertise to servers, video conferencing gear, consumer equipment and whatever else it thinks it can get away with, because it can guarantee a better quality of service, but also because that gives Cisco the means to keep its margins up. Cisco, may call its servers open, but they are not commoditized the way other servers are because Cisco has integrated this networking component.

By adding in the network layer, Cisco hopes to keep its servers from becoming the commodity that Dell’s, HP’s and IBM’s are. The same goes with things like the Flip camera that Cisco acquired when it bought Pure Digital. Sure it wants to boost bandwidth consumption so it can sell more telco gear, but it also wants to build a high-margin ecosystem around the home tied to its gear, in the manner that Apple has. But creating this end-to-end ecosystem tying the network and the device together isn’t the only way to ensure quality (although it may be the easiest).

Taking this back to the Juniper-Polycom deal, it’s not enough for these guys to shout, “Me too!” and hope that they can win playing Cisco’s game. A far more disruptive decision would be to open up the standards and ecosystem for teleconferencing and make Cisco-Tandberg gear look costly and less relevant. Polycom already delivers a standards-based telepresence products that will work with other non-proprietary gear (Cisco’s Telepresence is proprietary). Of course, by opening up too much Polycom and Juniper are facing an innovator’s dilemma that will almost certainly commoditize their hardware sales. They may be damned if they do, damned if they don’t.

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Cisco Moves Closer to Tandberg Acquisition

Colin Gibbs — Fri, 04 Dec 2009 16:10:13 +0000

Cisco’s bid to take over Tandberg has moved one step closer to reality, as the networking giant said today that it’s gained control of 91.1 percent of the Norwegian company’s shares. The announcement, which came via a filing with the Oslo stock exchange, follows Cisco’s move last month to up its offer to $3.4 billion from $3 billion after shareholders balked at the initial bid.

Tandberg’s video conferencing equipment is targeted at the middle market, making the company a good fit for Cisco and its high-end Telepresence gear. The deal must still get approval from the U.S. Department of Justice, though, which is reviewing the potential acquisition over concerns about potential competitive effects.

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Cisco Yields to Tandberg Shareholders

Stacey Higginbotham — Mon, 16 Nov 2009 14:38:32 +0000

Cisco said today it would up its offer to buy Tandberg to $3.4 billion — a boost of $400 million over its original bid, made last month — and said 40 percent of Tandberg’s shareholders have so far accepted the deal (Cisco needs 90 percent). About two weeks after the networking giant offered to buy the Norwegian video conferencing equipment maker, a group of shareholders protested, saying the offer was too low. This new offer should placate those shareholders, one of which was a brokerage firm that at the time of the original announcement had a target value on the shares that was slightly lower than the per-share price Cisco is now offering.

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With Video Conferencing Deals, Polycom in Sharp Focus

Om Malik — Thu, 12 Nov 2009 06:00:23 +0000

First Cisco Systems decided to buy Norwegian video conferencing equipment maker Tandberg for about $3 billion. This week, Logitech, a Swiss computer peripherals maker, acquired LifeSize, an Austin, Texas-based private company, for about $405 million in cash. The two deals have brought the fast-growing but often-overlooked video conferencing market into sharp focus. And that is good news for Polycom, a Pleasanton, Calif.-based conferencing equipment maker, CEO Bob Hagerty boasts. Here is why:

Hagerty said he thinks his company’s independent status will make it a preferred partner for giants such as Microsoft, IBM, Avaya and Hewlett-Packard, as they duke it out with Cisco and Logitech. The stock market seems to agree with him: Polycom stock is up 9 percent this month and up 77 percent for the year to date. When I asked Hagerty if this makes him takeover bait, he predictably dodged my question.

The simultaneous growth of pervasive broadband, improved compression codecs, distributed work forces, and shrinking travel budgets are brewing a perfect storm for the video conferencing market. “Bandwidth today is adequate, and we will soon be able to make HD video calls on a 500kbps connection,” he said. Hagerty believes that is going to help the use of video conferencing explode.

For a company like Polycom, the future might involve offering cloud-based services that could handle video originating from multiple locations using a central service. From low-cost end points to high-end telepresence systems, video-based collaboration is going to be a standard, he argued. And this is good news, not just for him but also for his rivals.

Hagerty didn’t pull any punches in his comments about Cisco. “Cisco [uses] a lot of words, but [there] is not much clarity on what products they will focus on,” he said in an interview. While Tandberg’s offerings are more standards-based, Cisco’s flagship telepresence products are proprietary in nature, Hagerty said.

“In the collaboration space, we are a great brand,” he said. “Frankly, it is great to be us…We are the last standing independent company of scale.” He is betting his close relationships with Avaya, Microsoft and others such as IBM — all enemies of Cisco — are going to help his company. In addition, Polycom thinks working with service providers, including phone companies, is a good way to make video conferencing available as a service.

Despite his bravado, Hagerty needs to worry about both Cisco and Logitech. These are two companies with deep pockets and deeper sales forces. They are desperate to make a splash in this market and are going to aggressively compete with Polycom. As I am one of those folks who always expects the worst — it must be my age — I believe that when there are multiple parties competing for domination of the same market, someone is left bleeding. Polycom is betting that the company’s friends will prevent it from being laid out on the mat.

This article also appeared on BusinessWeek.com.

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Cisco's Starent Purchase Faces Opposition

Om Malik — Thu, 29 Oct 2009 03:20:59 +0000

Cisco Systems’ $2.9 billion purchase of wireless networking equipment maker Starent might be in trouble: The Law Offices of Brian M. Felgoise, P.C. , a law firm in Pennsylvania thinks that the wireless equipment makes is taking the lowball offer and not striking a hard enough bargain. Cisco’s $3 billion purchase of Tandberg is also facing opposition from shareholders who own 24 percent of the company. I wonder if Cisco might have to raise its offering price on these deals.

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Tandberg Shareholders Want More From Cisco

Stacey Higginbotham — Thu, 15 Oct 2009 14:08:34 +0000

Updated with a statement from Cisco: Shareholders owning more than 24 percent of Tandberg’s stock have released a statement saying they are voting against Cisco’s proposed $3 billion buyout of the video conferencing equipment maker. Cisco announced the offer, part of its attempt to move into the middle market for video conferencing equipment to compliment its high-end Telepresence offering, two weeks ago. According to Reuters, brokerage SEB Enskilda said in a statement on Thursday:

”On behalf of 21 shareholders representing above 24 per cent of the outstanding shares in Tandberg, SEB Enskilda has…communicated to Cisco that these shareholders do not intend to tender their shares at the current offer terms.”

Despite the approval of the boards of both companies, these shareholders say they believe Tandberg is worth more than the 153.5 kroner ($27.49) per share Cisco is offering to pay (the brokerage firm that issued the statement has a price target on the stock that’s 11 percent higher). Cisco must get approval from 90 percent of Tandberg’s shareholders, so with almost a quarter of them dissenting, it will either sweeten the pot or walk. Maybe Tandberg’s rival in the video conferencing space, Polycom, would be more amenable to a deal.

Update: A Cisco spokeswoman offered this statement via email, after noting that it is unable to directly comment as it is in the middle of the tender process:

“We have stated previously that we believe we are paying a fair price for a quality asset and our offer comes recommended by the Tandberg Board of Directors. As noted in Tandberg’s communications to the Oslo Exchange, Cisco’s offer represents a 38.3% premium to the closing share price on July 15 – which is one day prior to major media reports of a possible transaction.”

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