Cisco going ahead with planned Tandberg buy


  • Business
  • Saturday, 05 Dec 2009

NEW YORK: Cisco Systems Inc said it plans to go ahead with its intended purchase of Norway’s Tandberg ASA, paving the way toward creating the world’s leader in video-conferencing equipment, although acceptances from shareholders were slightly below its target.

Cisco said about 89% of shareholders accepted the 19 billion Norwegian crown (US$3.4bil) deal. That was lower than the 90% Cisco had set as a minimum requirement, but the company said it would waive this condition.

Cisco had struggled to win over shareholders. Its original bid was rejected by over 90% of Tandberg shareholders, forcing Cisco to repeatedly extend its offer deadline and raise its bid by 10% last month.

Cisco said it could raise its stake above 90% by buying more shares on the open market or through various contracts, including options and other financial instruments.

“We intend on pursuing all options available to us,” company spokeswoman Kristin Carvell said in an email to Reuters.

Analysts have said that Cisco will likely eventually make Tandberg and its other video-related products work together seamlessly. That will help make Cisco’s equipment – including the routers and switches that support online communications – indispensable to business customers.

“We think the deal makes sense,” Brian White of Ticonderoga Securities said on Thursday. “If they can link it in with TelePresence it makes a lot of sense.”

Tandberg is the leading video-conferencing equipment maker, filling a gap between Cisco’s high-end TelePresence conferencing products and WebEx desktop video service. Tandberg holds 40% of the mid-tier market for video-conferencing, according to Wainhouse Research.

While Cisco repeatedly threatened to walk away, most analysts expected it to ensure the deal went through, since the leading network equipment maker has repeatedly touted video-conferencing as a key growth business.

Cisco chief executive John Chambers has said online video-conferencing was on the brink of wider adoption. The company estimates the total value of collaboration tools, including everything from video-conferencing to Google Apps, at around US$34bil. — Reuters

High-quality, real-time video-conferencing can help cut travel costs, and Cisco said it could do more, such as helping businesses like retailers, banks and hospitals launch services from remote locations.

Cisco can pursue such ambitions because it is one of the most cash-rich companies in the technology business, with US$35.4bil in cash and investments at the end of the quarter. The Tandberg deal also makes use of Cisco’s cash overseas, which accounts for most of the stockpile.

Emboldened by a recovering economy and customer demands for one-stop-shop type technology services, Cisco has been expanding its product line to include networking, security and video-conferencing.

A few weeks after announcing its bid for Tandberg, Cisco said it also planned to buy advanced wireless equipment maker Starent Networks Corp for US$2.9bil.

Analysts also have said the deal could trigger more deals in the video-conferencing space.

No rivals publicly emerged for the Tandberg deal, but analysts have said companies like Microsoft, Hewlett-Packard, IBM and Avaya could seek to add video-conferencing services.

Polycom Inc, the industry’s No. 2 player, has been seen as a target, although its CEO told Reuters last month that it was looking to step up partnerships with companies like H-P and IBM rather than pursue a buyout.

Tandberg shares closed at 163.20 crowns per share, below Cisco’s final bid of 170 crowns. Cisco shares fell four cents on the Nasdaq to US$23.83 on Thursday but were up slightly in after-hours trading. — Reuters

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