Polycom has agreed to acquire the assets of Hewlett-Packard’s Visual Collaboration business, including its Halo videoconferencing products and managed services, as part of a broad partnership for unified communications.
The companies did not disclose the size of the transaction, which they expect to close in the third quarter after regulatory and other approvals. The deal is intended to give greater reach to Polycom, a unified communications specialist, and allow HP to focus on cloud computing and connectivity, the companies said in a press release.
As part of the strategic partnership, HP will resell Polycom unified communications products including infrastructure, personal and group UC devices, UC managed services and audio-video software.
Both partners are rivals of Cisco Systems, which expanded its videoconferencing and unified communications businesses last year by acquiring Norwegian business video specialist Tandberg. Cisco plans to continue competing aggressively in both video and cloud computing as it focuses on fewer core businesses.
“I think it’s a great move for both of them,” said Wainhouse Research analyst Andrew Davis. “It makes this market even more of a duopoly.”
The partnership will take HP out of the videoconferencing equipment business, which has always been an awkward fit for the company, and strengthens Polycom in the high-end telepresence market, Davis said.
The acquisition will roughly double Polycom’s installed base of high-end videoconferencing platforms with the addition of HP Halo systems at 425 sites in 38 countries, according to Polycom President and CEO Andrew Miller. It will also get the managed network that HP runs to link those sites together.
Perhaps more significant, HP will now exclusively resell Polycom unified communications equipment through all its channels, including the former EDS consulting business, now called Enterprise Services, Miller said. Until now, enterprises buying through HP consulting have been able to choose systems from any vendor, he said.
Also as part of the deal, HP will embed Polycom’s videoconferencing software in tablets and mobile phones running WebOS. The software is scheduled to be available on both types of devices within 90 days, Miller said. Polycom already has supplied videoconferencing software for tablets from Samsung and Motorola, he said.
Polycom expects to bring over “a significant number” of the employees in the Visual Collaboration business but will not disclose the exact number until it files paperwork with the Securities and Exchange Commission, Miller said.
HP resold Tandberg video equipment until that company was acquired by Cisco, and since then Polycom and HP have grown closer, Miller said. The deal announced Wednesday “clearly and unequivocally” makes Polycom better able to compete against Cisco, he said. It also creates a strong three-way partnership among Polycom, HP and Microsoft, as Polycom already has a deal to provide equipment for use with Microsoft’s Lync unified communications platform.
A likely loser is Vidyo, a videoconferencing software vendor that last year formed a partnership with HP to extend the Halo portfolio to desktops and other endpoints, Wainhouse’s Davis said.
Looking ahead, what the companies do with tablets, PCs and phones may matter more than high-profile systems like the Halo platform that Polycom will acquire, Wainhouse’s Davis said. The growth of high-end videoconferencing revenue is likely to be flat over the next few years, and Halo was showing its age, he said. In that sense, the partnership on WebOS might be more significant.
“Fundamentally, this market is going to shift downward,” Davis said. “It’s going to shift down to the personal space,” driving down revenue for vendors but significantly expanding the number of users.
Wednesday’s news coincided with Polycom’s forming a consortium of service providers, the Open Visual Communications Consortium, for easier videoconferencing across different carrier networks and brands of video gear, Polycom’s Miller said. If the OVCC helps to expand the use of videoconferencing, it will help Polycom and HP’s business, he said.
