Cisco, Tandberg, and the Extron Factor

10/1/2009 4:26:18 PM
By PSN Staff

Cisco announced this morning that it is acquiring Tandberg, at a pretty hefty price tag of $3 billion. But according to Cisco Chairman and Chief Executive Officer John Chambers, who briefed the press this morning, that price is something of a bargain: "Collaboration is a $34 billion market and is growing rapidly—enabled by networked Web 2.0 technologies” said Chambers. “This acquisition showcases Cisco's financial strength and ability to quickly capture key market transitions for growth."

Cisco has been dabbling in the non-IT portions of AV for a while. But this acquisition takes things to a new level. And it comes on the heels of Cisco’s moves in other markets as well–specifically digital signage. Most importantly, it is adding a new twist to the past fears in the traditional “AV” market that IT companies would start eroding away the dominance of the old-line integrators who focused on charging nice margins for delivering AV solutions that played on the traditional wall between AV and IT. The fact is, that fear never materialized: IT integrators never put the big AV integrators out of business. What I would call the “Extron factor” is still strong in this world–AV and videoconferencing gear and systems never approached anything close to plug and play, or anything close to just “hanging projectors on IT networks” as some AV folks feared. Extron–together with Crestron and AMX and few others–represent the most successful, growing, and perennially prosperous companies in this industry because we will never achieve industry “standards” on display resolution, compatibility of connectors, computer interfaces, transmission bandwidth, scaling, etc. Connecting stuff and routing signals in the boardroom, classroom, church, and much less out across enterprise-wide campuses or out in public for digital signage–will always be complicated, and IT will never master this, just hang stuff on their network and walk away, or order all their gear from a web site.

But that being said (that IT integrators, or IT departments of big institutions won’t ever put AV companies out of business) the Cisco-Tandberg acquisition shows that the big IT equipment manufacturers are the ones we should be watching, not the IT integrators and administrators. Will a company like Cisco, or Microsoft, ever start pushing on the edges of the “Extron factor”? Maybe. But a more important prospect, is that they will expand the market. This should be the focus: the potential for the Cisco’s of the world to start leveraging their vast market penetration in IT to ramp up demand for “AV” services. If this happens, we all win.

Cisco has been all over the news. As I wrote last week, the newly opened 3 million-square-foot Dallas Cowboys stadium has been outfitted with Cisco Connected Sports technologies. The Cisco Connected Sports solution, deployed through a project with AT&T will help the Cowboys create new revenue streams and provide the flexibility to adapt the stadium to support any number of events. Cowboys owner  Jerry Jones is looking to avoid the “TV” experience on the huge LED screen above the field… he wants to keep digital signage in the others areas of the stadium. That stadium-wide digital signage system has not been fully utilized yet, but count on Jones, and Cisco, to not toe the traditional line.
 
Also last week, the Miami Dolphins announced that they have deployed Cisco TelePresence and Cisco StadiumVision technology to  give fans an immersive game-day experience. The Dolphins are the first sports franchise to deploy Cisco TelePresence, allowing the multifaceted venue to double as a meeting center as well as providing the game day interaction.

For those who want the official line on today’s news:

Cisco to Acquire Tandberg

SAN JOSE, Calif., NEW YORK, and, OSLO, Norway, October 1, 2009 – Cisco® (NASDAQ: CSCO) today announced a definitive agreement for Cisco to launch a recommended voluntary cash offer to acquire TANDBERG (OSLO: TAA.OL).  TANDBERG, based in Oslo, Norway, and New York, is a global leader in video communications, including a broad range of world-class video endpoint and network infrastructure solutions with intercompany and multi-vendor interoperability. With this proposed acquisition, Cisco will expand its collaboration portfolio to offer more solutions to a greater number of customers, further accelerating market adoption globally.

Under the terms of the agreement, Cisco will commence a cash tender offer to purchase all the outstanding shares of TANDBERG for 153.5 Norwegian Kroner per share for an aggregate purchase price of approximately $3.0 billion.  This represents an 11.0% premium to the previous day closing price of TANDBERG's stock, and a 25.2% premium to the 3-month volume weighted average closing price for TANDBERG's stock.  The proposal was recommended unanimously by TANDBERG's board of directors.

The acquisition is expected to close during the first half of calendar year 2010; however, the close date is subject to customary closing conditions, including regulatory review in the United States and elsewhere.  Cisco expects the acquisition to be accretive to Cisco's non-GAAP earnings in fiscal year 2011.
Key Facts:

    * Cisco's collaboration vision is to enable a sustainable, new level of enterprise productivity, agility and innovation by transforming the way people interact, share knowledge and deliver productive outcomes within and across organizations.
    * TelePresence and high-quality video have redefined how users communicate through easy-to-use, immersive, high-quality video experiences and are becoming a larger segment of the broader collaboration market.
    * TANDBERG's leading video endpoints and network infrastructure solution will be integrated into Cisco's world-class collaboration architecture.
    * This will enable intercompany and multi-vendor interoperability and ease of use across the full product portfolio – from desktop to immersive, multi-screen TelePresence.  This interoperability will benefit Cisco's customers, but also competitors and partners by accelerating customer interest in video collaboration globally.
    * Cisco continues to invest in the European market as a center of innovation across all market segments, and will continue to drive global growth by positioning TANDBERG's Norway operations as a European center of video excellence alongside our Service Provider video team in Kortrijk, Belgium.
    * TANDBERG's 1,500 employees globally, with innovation centers in Norway and the United Kingdom, will be extremely important as Cisco's team continues to drive video innovation and growth.
    * Upon completion of the transaction, TANDBERG's CEO Fredrik Halvorsen will lead the new TelePresence Technology Group, reporting to Marthin De Beer, senior vice president of Cisco's Emerging Technologies Group.

 

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