Cisco buys video manufacturer Tandberg for $3 billion

Cisco is to acquire Norwegian video conferencing equipment manufacturer Tandberg in a $3 billion cash deal, the first time the networking giant’s has acquired a public company outside the US.

The move signals Cisco’s startegic emphasis on video, says CEO John Chambers. “Our market is the entire collaboration market, and video is at the heart of that,” he said, describing Tandberg as “a Silicon Valley company in Norway.”

Tandberg CEO Fredrik Halvorsen said Cisco “had an excellent way of driving expertise. That was a reason for us in deciding to do this."

The Tandberg acquisition broadens Cisco’s video offerings, making them more accessible than the company’s existing telepresence system – a high-end product which can reach over $300,000. Despite the economic recession biting such capital-intensive installations, Chambers said sales of the system had increased 97% in the year from August 2009.

The Norwegian company’s technology is also compatible with Microsoft’s communications technology, a crucial factor given the increasing acceptance of the software giant’s Office Communication Server (OCS) as the defacto unified communications platform of choice.

Tandberg is unlikely to be the last of Cisco’s acquisition in the space. Having largely established the UC industry as a sideways method of selling its networking gear, the company appeared content to let the market ferment until issues of acceptance and adoption had settled. Now, says Chambers, Cisco plans to be “aggressive and active” with its $35 billion war chest.

The move saw Cisco’s shares rise 24 cents to $23.54 on the Nasdaq, on top of a 44% rise this year.

Tandberg’s competitor Polycom, which boast a 41% share of the video conferencing market, claimed Cisco’s acquisition meant it was now “the only independent vendor of video on a global scale.”

Steve Leyland, the company’s European managing director, said the move “reinforces the growing interest in visual communication as a mission-critical business tool,” proving it was a means of addressing  “real-world challenges such as an uncertain economy, reduced travel budgets, globalization, increasingly dispersed and mobile workforces, and the need to reduce carbon emissions.”

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