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3 Billion Reasons Why Video Conferencing Is Hot

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norway_headquartersCisco (s csco) today offered to buy Tandberg, a Norwegian company that makes video conferencing equipment, for $3 billion in cash, a move that would give it a broader customer base, a bunch of legacy gear as well as a name in the teleconferencing market. Cisco’s love of video conferencing is well known, thanks to its CEO John Chambers shouting it from the rooftops (or perhaps quacking it on the Flip cameras, whose maker Cisco purchased earlier this year), and this deal will extend Cisco deeper into the space.

And why wouldn’t Cisco love video conferencing? It’s an application that requires a fast network and a lot of bandwidth, something the communications industry is increasingly able to provide, not just at the high end but even to average consumers. And with those network expansions, Cisco wins, because it provides the underlying equipment to the service providers, as well as the video conferencing hardware and software to tweak the experience. Cisco sees video as a $20 billion revenue opportunity.

Which brings us back to the Tandberg buy and why Cisco made it. Its own Telepresence gear, which provides an immersive HD experience, is expensive, and is aimed squarely at the high end of the market, where it competes with services such as HP’s (s hpq) Halo. Tandberg gear, on the other hand, is cheaper and aimed at the middle market. Your CEO or top salespeople may meet with customers on Telepresence but internal meetings can happen on Tandberg gear. With teachers using video in schools to teach despite the swine flu, and health care workers using it for medical monitoring, having a less expensive product to offer those markets makes sense.

That still leaves the low or casual end of the market, where companies such as Skype and Logitech, which bought SightSpeed last year to add video capabilities, are jockeying for position. Applications such as iChat or GTalk, which also incorporate video as part of a unified communications scheme, are part of this casual video conferencing market, too, with Skype increasingly trying to integrate itself into unified communications as well. I’m not entirely sold on the need to video chat with my colleagues about a story when I can use voice, but for an engineer or visual thinker trying to map out a problem it might be a good channel to use to, say, quickly handle a design problem.

These low-end uses overlap with the consumer market, which includes families who are separated and myriad other folk who are turning to video instead of, or in addition to, voice. Cisco may enter this market by adding web connectivity to the Flip camera, but its decision to stay upstream of the casual user is a fine idea for now, as it needs to keep its margins up. However, the buy already has some competitors, such as Polycom, feeling a bit unsettled.

So as Cisco prepares to digest another large acquisition, it’s clear that faster broadband speeds are changing the way we communicate at a rapid pace, and that sometimes a picture is worth a thousand words. Or perhaps $3 billion.

21 Responses to “3 Billion Reasons Why Video Conferencing Is Hot”

  1. Cisco hasn’t meet analyst’s expectations in the video surveillance market, which given it’s rapidly moving from analog to IP, they should own by now; however, at a security show in Anaheim last week they announced a partnership with Pelco for co-development of HD IP cameras. Pelco is the leading brand in this market and was purchased by Schneider Electric in 2007 for $1.5B. I streamed the press conference from the show floor to my website using an Nokia N95 and At very end of the video Cisco’s Bill Stuntz talks more of the partership:

  2. Richard

    Another development in the casual market you can see when looking at Norwegian VoIP innovator Telio. They’ve launched a very affordable Videotelephony deal (using dedicated hardware from LG) for end users. This as the low end part of a complete (Tandberg based) videotelephony service. You can see the product in action at

  3. If Cisco can buy low-end Flip for the sourcing of content, then I am sure they will also be happy to enter the low-end video-conferencing box market. There is excellent transcoding s/w available already, slap it on commodity h/w, and then … “Homepresence” maybe ?

  4. I have been following the CODEC market for all most 20 years. In the non live trans-coding the biggest change is using your graphics (CUDA) card to power up the encoding, this has bought the price of real time or better then real time transcoders to 1/10th of what it cost last year.

    In the video conferencing area I have not seen move to CUDA based systems but I already see HD broadcast using PC’s (Vidyo, Nefsis etc). The cost of HD cameras are dropping, last week their was a demo of a USB 3.0 based HD web cam that did 1080p

    Is their a market for a dedicated video conferencing box going forward or will the same PC that is in the conference room that we use to load up Powerpoint will act as video conferencing system ?

    CISCO should look at buying the small start-ups that are developing software based video conferencing system that takes advantage of commodity hardware.

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    • Stacey Higginbotham

      My bet is there’s no eventual need for a dedicated box, especially given the GPGPU tools like CUDA that can take advantage of the GPU on a PC for encode and graphics and the potential for high end cameras to be built into computers. But there is a need for a bigger screen and a dedicated pipe into the system for the best experience, especially for high-end multi-party teleconferences. The audio component is important too, and would require a headset (but you’d look silly on the video) or a higher quality mic on the PC.

      Plus, Cisco doesn’t want to sell companies software for commodity boxes, it wants to sell dedicated gear running its own proprietary software at fat margins. But in a few years as the commodity hardware improves, that kind of quality software could become a viable threat.

      • Habib Ullah Khan

        We all thought when banks wanted to protect their most sensitive data they would eventually use software. But they now buy bigger and better boxes. Cisco’s TelePresence itself uses a codec box which pretty much allows the seamless incredible experience from a heavy lifting perspective. Video is VERY sensitive to packet drops. The box will stay.

  5. I think HP buys Polycom next:

    Basically, in the video conferencing market (all the way from desktop video to telepresence and other immersive solutions, and everything in between like plasma screens, etc.), the 2 leaders are Polycom (~40%) and Tandberg (~40%). Cisco, HP, Avaya, Nortel are all bit players in comparison.
    Both Polycom and Tandberg have good interoperability with other standards based systems, which Cisco, for example, doesn’t. Cisco-Cisco works fine. Cisco-others doesn’t. That’s why they lost the ~$45m Regus account.