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Cisco's WebEx buy: A big software bet

By Network World Staff , Network World , 03/19/2007
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Cisco's acquisition of WebEx is perhaps its most aggressive move yet - and likely not the last - to transform the company from network hardware vendor to applications and software provider.

The $3.2 billion deal, announced last week, puts Cisco in Microsoft's face, as well as other software companies, and positions the company for a fight in the battle to supply corporations with unified communications tools and services, analysts say. And as the market for routers and switches matures - and Cisco's growth prospects dwindle - it behooves the vendor to move into markets that are expanding at a much faster clip than network hardware.

To maintain its ambitious 10% to 15% annual growth targets, Cisco has sought to push into higher-margin software markets, such as unified communications and high-end IP video systems. The last several acquisition moves by Cisco show the network vendor's appetite for Web 2.0 and collaboration-related software.

"Some of [our] more recent acquisitions in this area bring out two themes," said Chief Development Officer Charles Giancarlo, in a conference call last week. One is the entire concept of social networking. In March Cisco bought Utah Street Networks, a social-networking company that runs Tribe.net - a free Web site that lets users set online communities around topics, post job openings or other activities. Almost a month before that, Cisco announced plans to acquire Five Across, a maker of software that lets companies set up social-networking features for a corporate Web site. (Terms of both deals were not disclosed.)

The other theme, Giancarlo said, is the WebEx deal as it addresses a move toward subscription-based services. "That's starting to penetrate more businesses - whether it's software businesses or subscription-based services," Giancarlo said. "Potentially, even some hardware-based businesses [could adopt this model], where they may [adopt] a more pay-by-the-drink model, rather than selling a piece of iron and getting one price at that point in time."

Frank Dzubeck, president of consultancy Communications Network Architects, says Cisco's software ambitions could also be seen as a survival tactic.

"It's the whole concept of 'get out of the hardware business'," Dzubeck says. "Basically, the only thing you can do [with hardware] is make it better or repackage it and make a platform out of it. So what do you do? You go into the software business."

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Regarding Mark LyndBy Anonymous on November 27, 2007, 5:58 pmMr lynd is a blow hard and loves to hear himself talk. Look into his history of lost opportunities at vetrix, hudson, TDI (TECSYS) and now Firescope...what a blow...

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To MrCarpenter: You mustBy Anonymous on March 24, 2007, 3:10 pmTo MrCarpenter: You must work for Microsoft, as you obviously know next to nothing about Cisco.

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This Does Not Make SenseBy Anonymous on March 24, 2007, 12:59 pmCisco is taking a huge diversion from it's core business, which is to sell gear. The fact is Cisco's products aimed at the SMB market basically suck, and they have...

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I find it pretty funny thatBy Anonymous on March 23, 2007, 9:04 amI find it pretty funny that you mention theft of anything in defense of Microsoft. If you know anything about history, MS was founded on a theft.

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As far as it needs to go....By Video Conferencing Consultant on March 21, 2007, 10:25 amThis is great news for the field of online collaboration. The bandwidth is now here to take these collaborative products to the next level. Look for significant...

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