11:10 AM

Cisco Raises Tandberg Bid To $3.4 Billion

A group of Tandberg stockholders protested the original offer to acquire the video conferencing equipment maker.

Cisco has raised its bid by about $400 million for video conferencing gear maker Tandberg to $3.4 billion, meeting the latest demand by Tandberg minority stockholders who have been holding out for a higher price. In making the announcement of the higher offer on Monday, Cisco said the latest bid is its final offer.

By raising its price -- more than 50% higher than the price of Tandberg stock when reports first circulated of a possible acquisition -- Cisco demonstrated just how important video conferencing and telepresence are to its IT game plan. In recent months, Cisco has been aggressively expanding from its traditional routers and switches business to embrace the data center and other IT avenues.

A group representing 24% of Tandberg stockholders originally protested the acquisition price. Cisco said it now has backing for the deal from about 40% of Tandberg shareholders.

There was a sense of finality to the Cisco offer, even as some Tandberg stockholders claimed the company was worth more than Cisco is willing to pay. "If Cisco does not achieve the desired level of acceptances," Cisco said in a release Monday, "the company will withdraw the offer and evaluate alternative ways to expand our activities in the video communications market."

No alternative suitors have emerged for Tandberg, which is strong in the mid-range video conferencing market. Cisco, whose greatest strengths are in low-end and high-end video conferencing, has been promoting video conferencing heavily in recent months. Cisco's drive to expand its video conferencing offerings has been accelerating since it acquired WebEx in 2007.

Cisco CEO John Chambers has made no secret of his plans to push video in general and video conferencing in particular to the forefront of the company's expanding markets. "Video," he said at a keynote Las Vegas show nearly two years ago, "is the next wave of Internet disruption."

Other major players in the mid-tier video conferencing market include Polycom and Radvision.

Tandberg's directors and top management approved the original $3 billion Cisco offer more than a month ago when it was originally announced. Cisco said it has extended the acceptance period for its latest offer until Dec. 1.

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