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Cisco Buying Tandberg, Broadening Videoconferencing Footprint

The $3 billion acquisition is a major building block in Cisco's pledge to broaden the firm's focus from routers and switches into other areas.
Cisco Systems continued on the acquisitions path Thursday as it announced a plan to acquire videoconferencing company Tandberg for $3 billion.

The acquisition is a major building block in Cisco chairman and CEO John Chambers' pledge several months ago to broaden the firm's focus from routers and switches and expand into other areas, and particularly video.

The Tandberg technology will complement Cisco's telepresence videoconferencing service and Cisco's online WebEx technology.

"Cisco and Tandberg have remarkably similar cultures and a shared vision to change the way the world works through collaboration and video communications technologies," said Chambers in a statement. "Collaboration is a $34 billion market and is growing rapidly -- enabled by networked Web 2.0 technologies."

Tandberg's chief executive Fredrik Halvorsen will lead Cisco's new telepresence technology group, reporting to Marthin De Beer, senior VP of Cisco's emerging technologies group. Long headquartered in Norway, Tandberg has about 1,500 employees. The $3 billion cash price represents an 11% premium over the closing price of Tandberg stock on Wednesday.

Cisco said Tandberg's technology will be integrated into Cisco's existing collaboration architecture and will offer multi-vendor interoperability from desktop through multi-screen telepresence solutions.

Tandberg's board of directors has unanimously recommended the deal to its shareholders, in a move that will likely discourage other companies from starting a bidding battle for the Norwegian company.

Just days ago Chambers noted in an interview that Cisco's cash war chest of $35 billion -- the largest in the IT industry -- will be used for acquisitions. And, it was 18 months ago at a Las Vegas show that Chambers served notice that Cisco planned to aggressively broaden its product mix. "Video," he said at the time, "is the next wave of Internet disruption."

Cisco has always made acquisitions, but its more recent pickups have been away from its traditional router/switch core business. Earlier this year Cisco acquired Pure Digital Technologies for $590 million, thereby gaining a big new presence in the consumer business with Pure Digital's popular Flip digital camcorder.

In March, Cisco startled the IT industry -- and its traditional allies HP and IBM -- by announcing a line of blade servers as it set its sights on data centers. In announcing its move into data centers, Cisco also unveiled a strong group of partners including BMC Software, Citrix Systems, EMC, Intel, Microsoft, SAP, and VMware.

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