Polycom A Takeover Target

Fueled largely by the boom in video conferencing gear, Polycom is a possible acquisition target as hedge funds continue to covet the firm, according to media reports Friday.

The Gores Group, a private equity group with investments in networking firms, is moving to reopen talks with Polycom, the Financial Times reported. After Cisco paid $3.4 billion for videoconferencing provider Tandberg, interest in Polycom has heated up.

Now the largest independent videoconferencing provider, Polycom has recently inked new contracts with Avaya and HP.

The Gores Group already has a stable of networking investments, led by its 2008 investment in Siemens Enterprise Communications unit and its earlier investment in Enterasys and SER Solutions. Enterasys was formerly known as Cabletron.

In addition to the recent acquisition and takeover activity in videoconferencing, the overall networking sector has also been alive with deals, many of them fueled by the bankruptcy and dismemberment of Nortel Networks.

The Financial Times said Polycom had been the subject earlier of takeover talks with private equity firm Apax Partners, but the reported $3 billion deal was a hurdle. Now, according to the newspaper, Gores Group has reopened talks with Polycom. None of the reported involved parties have commented publically on the reports.

It may not be easy to acquire Polycom if Cisco's experience with Tandberg is an example. Cisco initially struck a deal to acquire Tandberg for $3 billion, but some Tandberg stockholders were successful in dragging out the acquisition negotiations and driving up the price to $3.4 billion. At one point, Cisco threatened to walk away from the deal, according to some reports.

Polycom announced last week that it is stepping up its partnership with HP, which plans to use Polycom solutions in its expanded unified communications and collaboration services portfolio. In a separate announcement, March 22, Polycom said it is expanding its relationship with Microsoft to jointly develop and deliver a unified communications solutions portfolio.