Cisco announced on 1 October that it would make an all cash offer worth $US3.0 billion for the Norwegian-based Tandberg. Commenting on the deal Moody's Investor Services said: "Although the enterprise videoconference market is competitive, particularly at the lower end, including Polycom, LifeSize, and others as well as potential new entrants such as Skype, Moody's views favourably the complementary nature of the intended Tandberg acquisition and expects Cisco to leverage its long track record, deep understanding of the enterprise market and dominant market positions across numerous network-related segments to further enhance its position in the videoconference market."

Ovum analysts Richard Mahony and David Molony said: "We think this is a smart deal for Cisco. Tandberg has the full toy box for videoconferencing systems. And while Cisco has made a big noise with Cisco TelePresence since it launched in 2006, videoconferencing is much more than big-screen suites – which make up only 25 percent of the market...For the moment the acquisition plugs holes in Cisco's video portfolio and is a land-grab in telepresence, where we estimate the combined entity will have a 65 percent market share. To be more than that – to be a catalyst for change in work and home life – Cisco will need to take its grand video vision and give its customers a broader understanding of the role that video communications and collaboration tools can play in the home and in the enterprise."

On a less enthusiastic note they added: "If there's something unexciting about this deal it is because it is a bit of classic box-buying and not a services acquisition. All of Cisco's product development news is around service architectures and service support, and this isn't. Services account for 16 percent of Tandberg's revenues, and while Cisco CEO John Chambers purred at the near-50 percent service 'attachment rate' in telepresence, that's only at the top end of business video communications. Also, for fellow CEO Fredrik Halvorsen, service attachment is probably a new term; for him service is something that's included in the package. The two will need to sort out what's important here – more box-shifting, or an earth-moving shift to service packages on video."


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From the US Allan Sulkin, TEQConsult Group writing on the No Jitter blog commented: "Tandberg and Polycom had relatively limited marketing resources in comparison to Cisco's. Cisco showed what it could do to drive a market when it entered IP telephony through its Selsius Systems acquisition almost 11 years ago. IP telephony systems were certainly going to replace traditional digital PBXs, but Cisco certainly accelerated the timetable and forced the traditional voice system suppliers to respond more quickly to the new competitive threat.

Avaya tipped to acquire Polycom
"Tandberg products fit in very nicely with Cisco's UC portfolio. Competitors such as Avaya will likely partner more closely with Polycom or even consider an acquisition, because the playing field has now changed. Polycom was able to compete effectively against Tandberg, but will find it far more difficult going against Cisco."

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Also on No Jitter, Irwin Lazar, Nemertes Research commented: "It's likely we'll see Polycom move closer to both Microsoft and Avaya to deliver a complete competitive UC offering voice, video, and presence-enabled applications to compete with those from Cisco...Smaller vendors such as Avistar, LifeSize, and Vidyo are increasingly likely targets for acquisition. HP, currently a Tandberg partner, faces the loss of a key channel."

Melanie Turek, Frost & Sullivan said rumours of Avaya buying Polycom had been circulating prior to Cisco's move on Tandberg and, even if nothing comes of these rumours the Cisco-Tandberg deal could be good for Polycom. "Polycom is now the leading independent videoconferencing vendor...[and] now the videoconferencing vendor of choice for all other unified communications players. It has to be: why would anyone want to sell its main competitor's products if it can avoid doing so?"

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