Larry Kless' Weblog: Tandberg

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Thursday, October 1, 2009

Cisco to Acquire Tandberg for $3 Billion in a Bid to Own the Videoconferencing Space

Mergers and acquisitions are heating up and in a move that has sent shockwaves through the video collaboration market, Cisco has made a hefty bid of $3 Billion in cash to acquire Norwegian videoconferencing vendor TANDBERG. The definitive agreement was recommended unanimously by Tandberg’s board of directors and represents an 11.0% premium to Tandberg's closing stock on Wednesday and more than 25% to the average closing price over the last three months.

The merger of the two companies will likely create an unstoppable force that both disrupts the collaboration market and extends the reach of both platforms from low bandwidth desktop and mid-range group based videoconferencing systems to HD videoconferencing and TelePresence. In nothing short of a brilliant move by Cisco to acquire rival in the space, the San Jose company will add Tandberg's portfolio of middle market end points, desktop units, multipoint control units (MCUs) and network infrastructure solutions into it's growing line of video offerings.

Video collaboration is hot and Cisco knows that. In the NY Times, Ashlee Vance highlighted Cisco's recent M&A activity:

"In recent years, Cisco, based in San Jose, Calif., has been one of the technology industry’s most aggressive companies when it comes to acquisitions. It has bought close to 40 companies in the last five years, including the $6.9 billion purchase of the set-top box maker Scientific Atlanta and the $2.9 billion purchase of the Web meeting software maker WebEx. This year, Cisco bought Pure Digital, which makes the popular Flip video camera for consumers, for $590 million."

Several years earlier, Cisco acquired web conferencing platform WebEx which has become the desktop standard for many companies and core to Cisco's unified communications experience. Cisco Chairman and CEO John Chambers pointed out that Cisco and Tandberg share similar cultures and visions on video technologies and unified communications collaboration and video communications, and noted that, “Collaboration is a $34 billion market and is growing rapidly—enabled by networked Web 2.0 technologies."

In an email to channel partners Tandberg CEO Fredrik Halvorsen wrote:

"Moving forward, our diverse mix of partners worldwide will continue to be critical to the success of the combined company. With a combined channel network, TANDBERG's Video Conferencing and Audio Visual partners will be invaluable in helping to broaden the appeal of Cisco's solutions portfolio and a welcome addition to their channel. Systems Integrators and Service Providers will also benefit from a stronger global services and delivery model. The combination of TANDBERG and Cisco will create an organization that will yield significant new opportunities for partners to sell a broader range of products and grow their businesses. Together with our partners, we believe we can drive explosive growth in this market."

In this video, the two CEOs discuss the merger.

According to current Q2 data from Wainhouse Research, TANDBERG has 40% market share followed by Polycom in a close second with 34% in the $1.5 billion-a-year market. ZDNet's Larry Dignan speculated that Polycom could be next on Cisco's M&A list and the ripples of the disruption have already been felt in the videoconferencing market. Tandberg rival Radvision, maker of MCUs, gateways and interactive video platforms for Cisco saw its stock plummet today with analysts now calling them "a friend now foe."

Earlier in the year, I had the opportunity to see a demonstration of the Tandberg Telepresence T3 system. I was impressed by the quality, the room design and interoperability with non-telepresence systems. Many in the industry know that Radvision technology was under the hood of many Cisco products. I'd like to see Cisco incorporate Tandberg's innovation and design aesthetic into their line of video collaboration tools. It's also likely that Tandberg and Cisco TelePresence customers will be taking a wait and see approach to technology purchases until the 2010 when the two companies are able to merge their product lines. The Tandberg videoconferencing products will offer an affordable HD alternative to Cisco's expensive and proprietary TelePresence.

Both companies have their own unified communications platforms to bridge collaboration across their platforms. Now with this partnership, unified communications just got more unified.

It's also interesting to note that back in February of this year Howard Licthman publicly predicted that Cisco would buy Tandberg. He has other thoughts and analysis here.

About TANDBERG
TANDBERG is the leading provider of telepresence, high-definition videoconferencing and mobile video products and services. The Company has dual headquarters in New York and Oslo. TANDBERG designs, develops and markets systems and software for video, voice and data communication. The Company provides sales, support and value-added services in more than 90 countries worldwide. TANDBERG is publicly traded on the Oslo Stock Exchange under the ticker TAA.OL. Visit www.tandberg.com for more information.

About Cisco
Cisco (NASDAQ: CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

Update 10/9/09: Correction on Radvision OEM in Cisco products

Saturday, March 28, 2009

Tandberg Telepresence T3 Demonstration, An "Immersive Experience"

Videoconferencing technology has been around for a long time with early systems consisting of two closed-circuit television systems connected via cable. Scientists and engineers at Bell Telephone Laboratories pioneered in the development of television and, , demonstrated the first intercity TV transmission over wire with Herbert Hoover, then Secretary of Commerce, who made the first visual telephone call in 1927. Some other early examples are the German network set up between 1938 and 1940, and the British GPO lines at the same period. Bell Labs had a number of prototype PicturePhones which they first introduced in 1956. Most were one-way transmissions of picture and sound over telephone lines.

It wasn't until the 1964 World's Fair that the devices debuted to the public. Visitors to the exhibit used Picturephones, that transmitted voice and image between two nearby booths. Years later in 1970, AT&T introduced the Picturephone but it was still impractical and expensive and a commercial failure when first offered to consumers ($160/month for each fixed end-point). It wasn't until the 1980's when digital networks were deployed in the corporate sector and video compression standards were set that equipment manufacturers were able to deploy the expensive videoconferencing system into into the business sectors.

With the rise of IP networking it gave rise to desktop videoconferencing, or webcam conferencing with CU-SeeMe and Microsoft Netmeeting as well-known predecessors to Skype.

Today, this "immersive experience" has come full circle aided by the big push by by Cisco TelePresence technology into the mainstream. Telepresence technology is essentially a true high definition videoconferencing experience without all the distractions and numerous technical difficulties that generally plagues videoconferencing. The Telepresence room environment makes you to feel as if those you are conferencing with at the remote sites are actually sitting in the same room, with a life-like scale, movement and presence. Telepresence is defined as a real-life experience.

Tele - far off or at a distance
Presence - being present

Sagee Ben-Zedeff of Video over Enterprise says, "All telepresence systems aim to provide convincing stimuli, such that the user will perceive no difference between physical and virtual presence. In fact, even before they were known as “telepresence systems” most of the modern communication systems were trying to preserve some sense of telepresence (for instance, “talking to someone” on the telephone)."

These systems are not priced for the consumer market with the average cost of Cisco's TelePresence System 3200 at $340,000 per end point. Bandwidth also comes as premium with Cisco bandwidth requirements at 3-9 Mbps at 720p and 9-12 Mbps at 1080p for IP QoS (Quality of Service) connections.

While Cisco is a household name other companies like HP Halo, LifeSize, Tandberg, Polycom and notable smaller players, Teliris and Telanetix have their own Telepresence systems. I recently had the opportunity to see a demonstration of the Tandberg Telepresence T3 by Richard Grace of Tandberg at their Bay Area Executive Briefing Center. I was impressed by the quality, the room design and interoperability with non-telepresence systems.

Michael Brandofino, president and CEO of Glowpoint, a provider of managed video communications services says that there's "a perfect storm" for the future growth of telepresence. He notes that, "worldwide revenue opportunity for telepresence is projected to be $5 billion (U.S.) by 2011, with the largest portion of the revenue ($3.8 billion) driven by network and managed service revenues.” He identified Cisco's huge marketing campaign as one of the key drivers along with companies globalizing and todays workforce becoming more comfortable with the technology.

About TANDBERG
TANDBERG is the leading global provider of telepresence, high-definition video conferencing and mobile video products and services with dual headquarters in New York and Norway. TANDBERG designs, develops and markets systems and software for video, voice and data. The company provides sales, support and value-added services in more than 90 countries worldwide. TANDBERG is publicly traded on the Oslo Stock Exchange under the ticker TAA.OL. Please visit www.tandberg.com for more information.

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