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11/20/2009
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Telepresence Acquisitions Booming

Videoconferencing firms BT, Polycom, Logitech, LifeSize Communications, Cisco, and Tandberg all have either made deals or are in negotiations.

After decades of losses and several failing iterations, video conferencing is finally catching on with a vengeance.

The idea of conducting business on video screens that communicate over telecom lines was introduced by AT&T in 1964 as the Picturephone and it was supposed to revolutionize business communications while cutting costs at the same time. But it has taken until recently for the technology to find a foothold in business.

In the latest development, BT and Polycom announced this week that they have signed a three-year agreement to offer their version of video communications to enterprises and public sector organizations. A week prior Logitech International agreed to acquire another video communications specialist, LifeSize Communications, for $405 million.

In the meantime, the mother of all video communications acquisitions continues to play out as Cisco works to gain approval of its $3.4 billion offer to acquire Tandberg.

The fact that the acquiring companies are willing to pay so much for video communications expertise underscores their belief that video conference, telepresence, and other versions of business video communications will continue to grow robustly. Tandberg's revenues are running at a rate of less than $1 billion a year and Cisco is willing to pay $3.4 billion for the Norwegian firm while Logitech is paying $405 million for LifeSize, which expects to log $90 million in revenues this year.

BT and Polycom said the first set of their joint offerings will be available by the end of the year. BT is contributing its managed services and global high-speed MLS network to the partnership while Polycom is contributing its telepresence, video and voice communication solutions. "BT and Polycom have the unique ability to provide our customers with the unified conferencing solutions that they require," said Aaron McCormack, CEO of BT Conferencing, the video communications unit that was established more than 20 years ago.

Logitech's president and chief executive officer Gerald P. Quindlen expects the LifeSize acquisition to extend its reach beyond the desktop. While their video communications services will be available to large enterprises, Logitech and LifeSize are making a strong push to target small and medium businesses as well as home offices.

Video communications have come a long way since AT&T introduced its Picturephone at the New York World's Fair in 1964. Consumers and potential business users found the Picturephone's technology fascinating, but cumbersome and difficult to use. It was a business flop and AT&T tried again with the VideoPhone 2500 in the early 1990s, but that effort, too, failed to gain traction.

Today, telepresence suites are popping up at hotels where a conference room outfitted with the technology can rent for $500 an hour. Businesses are flocking to video communications to cut travel expenses, because they find face-to-face meetings of the technology to be lifelike " albeit sometimes eerily so.

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