* Analyzing Cisco’s $3.2 billion purchase of WebEx
We interrupt our normally scheduled newsletter planned for a VoiceCon report to discuss Cisco’s announcement last week that it plans to acquire WebEx for $3.2 billion. The deal represents about a $300 million premium to buy the market share leader in Web-based conferencing and collaboration.
In Cisco’s announcement, Charlie Giancarlo, Cisco chief development officer said, “As collaboration in the workplace becomes increasingly important, companies are looking for rich communications tools to help them work more effectively and efficiently.” He continued, “The combination of Cisco and WebEx will deliver compelling solutions accelerating this next wave of business communications.” We agree with both of his points.
Cisco also made note that the acquisition will help the company expand its position in the SMB market. We think that this acquisition will also help Cisco expand its collaboration capability with larger enterprises that often frequently rely on premises-based solutions for conferencing that include requirements for both hardware and hosted services.
And while some analysts might believe the acquisition positions Cisco as a direct competitor with some of its service provider customers, we believe that some service providers already rely on reselling WebEx in their portfolio. This acquisition might actually help the service provider by providing the extensive support network Cisco has built.
Cisco and WebEx also stand to benefit from the opportunity for increasing sales by sharing their distribution partners. And the benefit to Cisco isn’t limited to just Web conferencing since WebEx also offers specialized software tools like PCNow (providing users with remote access to their PCs) and Everdream (providing desktop management services).
Finally, the WebEx acquisition also gives Cisco a leg up over Microsoft in offering collaboration software as a service. We believe that pitting one 800 pound gorilla against another in the hosted collaboration market will provide an immediate benefit for both the SMB and larger enterprise customers, and that the benefit will extend overall to both premises-based and hosted IP-based collaboration tools.
Next time, back to reporting on some VoIP-centric innovation demonstrated at VoiceCon earlier in the month.
