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Cisco nets WebEx

Acquisition helps networking giant tap into SMB collaboration market

Cisco Systems Corp. has nabbed one of the top companies that deliver on-demand collaboration applications over the Web.

WebEx, one of CDN’s top five vendors to watch in 2007, was acquired by Santa Clara, Calif.-based networking giant Cisco for US$3.2 billion in cash.

Charles Giancarlo, Chief Development Officer at Cisco as well as CEO of Linksys, said the deal will give both firms distribution channel synergies right away along with some technology synergies down the road.

Subrah Iyar, CEO of WebEx echoed Giancarlo’s comments adding that WebEx’s channel base can provide more market presence in the SMB segment, but Cisco could help his company in the enterprise space.

“WebEx’s global enterprise (business) is only 20 per cent and under. With Cisco’s distribution they can drive that area of the market and we can support them with our channel on the SMB,” Iyar said.

Giancarlo said that the technology synergies particularity with LinksysOne and TelePresence are medium to long-term plays. “The integration of voice and other technologies into the WebEx offering will improve the experience in that environment,” he said.

HP released a statement on Cisco/WebEx partnership in regards to TelePresence that said: “While Cisco is spending US$3 billion to beef up videoconferencing offerings, HP Halo is already the industry leader in high-end videoconferencing solutions considering Halo launched in 2005; has more than 90 studios deployed in 17 countries; Halo is built on the HVEN, a global network created especially for real-time video and audio; and HP’s partnership with videoconferencing vendor Tandberg.”

Cisco is initially positioning this acquisition as an adjunct to its Unified Communications products and strategy.

Ned Hooper, vice-president of Cisco’s corporate business development, said this acquisition addresses growth opportunities in unified communications and collaboration markets.

“WebEx is a leader and is a natural extension for us in unified communications and collaboration in the Web conferences market, which will grow between 23 and 27 per cent up until 2010,” Hooper said.

Iyar said WebEx has 65 per cent of the market followed by Microsoft through its Playserve acquisition and then Citrix.

Carmi Levy, a market analyst from Info Tech Research of London, Ont., said WebEx Communications is an up and coming vendor in the collaboration space. Collaboration, especially online collaboration will be a huge growth market this year. “WebEx is team driven collaboration where the group sets up a virtual team through the Web. Instead of email with bells and whistles this is an enabler of for (work) place productivity,” Levy said.

Founded in 1995, WebEx reported revenues of US$380 million last year. It has more than 2,100 employees and an operating profit of US$107 million. Hooper called WebEx “a great cash flow generator.” The company has more than 2.2 million registered subscribers in 85 countries using its rich media Web collaboration meetings.

“We are taking a successful company and trying to make it more successful under the Cisco family,” Giancarlo said.

According to Giancarlo, there are no plans to change the business model at WebEx.

“This is a new model for Cisco we do have to be careful going forward,” he said.

Giancarlo believes that the subscription model is a theme that will penetrate more businesses and has the potential to even break into the hardware side of the business.

WebEx’s subscription-based services strategy has given the company a key differentiator in the market and Cisco plans to preserve this business model going forward, Giancarlo added.

Following the close of the transaction, WebEx will become a part of Cisco’s Development Organization. Iyar will report directly to Giancarlo.

Comment: cdnedit@itbusiness.ca