Text 16512, 119 rader
Skriven 2007-03-19 14:55:30 av mike (1:379/45)
Ärende: Cisco Ups Ante in War with Microsoft
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From: mike <mike@barkto.com>


http://www.businessweek.com/technology/content/mar2007/tc20070316_657554.htm


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In an escalating arms race for control over the unified communications market,
Cisco's acquisition of WebEx is its largest yet


About a month ago, WebEx found itself on the receiving end of several
unsolicited takeover offers. WebEx Chief Executive Subrah Iyar had long
insisted the decade-old Web conferencing company would go it alone. But the
overtures were so attractive, he says, he couldn't disregard them without
rousing shareholder ire. Rather than settle, he dispatched representatives from
WebEx's headquarters in Santa Clara, Calif., to the Cisco Systems hub in San
Jose, in hopes of attracting another, more attractive bid.

The 2.9-mile jaunt across Silicon Valley paid off. Cisco (CSCO), the largest
maker of networking equipment, on Mar. 15 said it would pay $3.2 billion in
cash for WebEx (WEBX), which helps more than 2 million registered subscribers
hold meetings and share information over the Web. The deal values WebEx at $57
a share, 23% more than its Mar. 14 closing price, and a 67% premium to the
stock price in early January, before upbeat fourth-quarter results triggered a
rally. It's the largest acquisition for Cisco since the $6.9 billion purchase
of set-top box maker Scientific Atlanta in 2005, and it's due to close later
this year. Why the Hefty Price

With $20 billion in cash, Cisco can certainly afford WebEx. But the target
didn't come cheap, especially for a company that in recent years has spent
closer to $100 million or less on most deals, Scientific Atlanta aside.

So what's WebEx got that Cisco wants? It aids Cisco in a battle with Microsoft
(MSFT) in the growing market for what's known as unified communications,
various technologies that foster collaboration in the workplace, including
instant messaging, e-mail, calling services, and letting even far-flung users
know when colleagues are unavailable (see BusinessWeek.com, 1/18/07, "Nortel
and Microsoft Take Aim at Cisco").

Cisco and Microsoft are engaged in a takeover tug-of-war in communications
services. On Mar. 14, Microsoft said it purchased voice-recognition services
provider Tellme Networks (see BusinessWeek.com, 3/15/07, "Microsoft's Expansive
Plans for Tellme"). That, in turn, came on the heels of Cisco's February
purchase of Reactivity, which helps companies improve how they do business over
the Web, for $135 million in cash, and Five Across, a provider of
social-networking capabilities. "There's been that arms race developing between
Cisco and Microsoft," says Jon Arnold, president of telecom consultancy J
Arnold & Associates. "They are battling for control of enterprise
communications. Both companies are caught up in a spending spree, outspending
each other to keep [promising outfits like WebEx] away from competitors." WebEx
wouldn't name its suitors, but candidates included Avaya (AV) and Siemens (SI),
says Arnold. Other analysts say IBM (IBM) likely was interested, too. Narrowing
Microsoft's Lead

WebEx and Tellme probably won't be the last acquisitions for Cisco and
Microsoft either. "We are always talking to various companies," says Janice
Kapner, director of marketing for the Microsoft Unified Communications Group.
"We'll make the right investments to make [unified communications] happen."
Meantime, Cisco Chief Development Officer Charles Giancarlo and other
executives hinted in a Mar. 15 conference call that they're amenable to
shelling out for more mature companies, not just startups.

Analysts reckon Cisco may be looking to acquire companies that specialize in
customer relationship management or mobile communications. Microsoft,
meanwhile, may be looking to boost its communications hardware and
social-networking capabilities. Both companies are converging on a market that
has room for growth, says Jan Dawson, vice-president for U.S. enterprise
practice at consultancy Ovum. "The vast majority of enterprises haven't bought
anything yet," he says. Adds Bern Elliot, research vice-president at
consultancy Gartner (IT): "No one vendor has the complete portfolio."

Still, Microsoft is generally viewed as being ahead of Cisco in key areas.
Microsoft's communications features are already deeply embedded in its desktop
and server operating system, in its Outlook e-mail program, in its Windows
Messenger, in Windows Mobile software for mobile devices, and on MSN.com.
New Generation of Services

Cisco has strong ties with corporations around the world thanks to its business
in the switches and routers that direct Internet traffic. And WebEx gives those
customers more to do on the Web. WebEx commands more than half of the $795
million Web conferencing market, says consultancy WinterGreen Research. It's
also the hosted Web conferencing market leader, ahead of Microsoft's Live
Meeting service—though Live Meeting has been gaining traction, with the number
of meetings it has hosted rising 70% in the past year.

Under Cisco, WebEx growth rates could accelerate, as Cisco peddles the service
to its small-business customers, who make up 25% of its total buyers, and helps
WebEx find distribution overseas. Before the acquisitions, WebEx's revenues
were expected to grow 20% this year, to
$455 million, and another 17% in 2008, according to RBC Capital Markets.
Because WebEx enjoys higher, 84% margins, Cisco could see its margins expand as
well, though WebEx will still be a tiny part of its overall business, which
generated $8.4 billion in sales in the most recent quarter.

Cisco's Web conferencing traction should be troubling for Microsoft because
services like WebEx—essentially, hosted offerings through the Web that don't
require extra network equipment—could prove popular with small businesses that
often prefer the less expensive, simpler offerings as an alternative to
purchasing servers. Such services could also lay the foundation for a new
generation of unified communications, such as at-work social-networking
features. "We are paving the way to the communications environment of the
future. We feel everybody else is chasing us," says Giancarlo, who will oversee
the WebEx business and is widely seen as heir apparent to Cisco Chief Executive
John Chambers.

But with Microsoft on the hunt for takeover targets, the chase may be
short-lived.
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Oddly, there's no mention in the article about Cisco's push into the IPTV
arena....

 /m

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