Polycom: A potential takeover target following Cisco-Tandberg deal

Polycom: A potential takeover target following Cisco-Tandberg deal

Summary: With Cisco gobbling up Tandberg for $3 billion and bolstering its video conferencing lineup all eyes turn to Polycom, another market leader that looks ripe to be acquired. If not, Polycom is expected to be able to hold its own against Cisco.

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TOPICS: Cisco
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With Cisco gobbling up Tandberg for $3 billion and bolstering its video conferencing lineup all eyes turn to Polycom, another market leader that looks ripe to be acquired. If not, Polycom is expected to be able to hold its own against Cisco.

Cisco's acquisition of Tandberg gives the company a bigger installed base for its telepresence products and an arsenal of lower-end video conferencing gear. Polycom will either need to compete head-on, or be acquired. Analysts seem to be betting that Polycom will be acquired. If not, analysts say Polycom (all resources at ZDNet, TechRepublic) can gain video conferencing share in the short run as Cisco completes the Tandberg purchase.

Cowen analyst John Marchetti notes that Polycom can find plenty of partners given that Tandberg is now owned by Cisco. Marchetti adds that Polycom can compete with Cisco, which is likely to take a hands off approach with Tandberg, but it's hard to rule out a takeover in the future. Marchetti says:

We believe that Polycom still has significant room for growth given our positive view on the video conferencing market and its strong product offerings in enterprise video collaboration. Further, from a partnership perspective, Polycom likely benefits as other equipment vendors look for an opportunity to work more closely with Polycom. Lastly, while acquisition possibilities likely look to increase for Polycom over the near term, we think, given its voice business, that Polycom is a little more complicated and expect that if a deal does occur, it will take some time to happen and do expect an announcement is imminent.

That voice business that Marchetti refers to is the other side of Polycom. The company is a specialist in video conferencing but also provides voice conferencing and devices for calls. That voice business could complicate a takeover.

Simply put, an acquisition of Polycom may take some time. Piper Jaffray analyst Troy Jenson says that Polycom can do fine on its own. Jenson said Cisco's Tandberg takeover could benefit Polycom and other competitors like LifeSize.

Here are Jenson's reasons to believe that Polycom can compete with Cisco/Tandberg:

  • The overall industry is going;
  • Polycom is the only big video player remaining;
  • Tandberg customers may pause ahead of the Cisco integration;
  • Polycom can land new channel partners that may not want to sell Cisco gear;
  • And Polycom can cherry pick Tandberg sales talent.

In the long run, however, Polycom is likely to be an enticing target for a larger fish looking for a video conferencing play.

Topic: Cisco

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5 comments
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  • Yep, Polycom to HP

    I think HP buys Polycom next: http://www.sramanamitra.com/2009/10/01/cisco-buys-tandberg-hp-to-buy-polycom/

    Basically, in the video conferencing market (all the way from desktop video to telepresence and other immersive solutions, and everything in between like plasma screens, etc.), the 2 leaders are Polycom (~40%) and Tandberg (~40%). Cisco, HP, Avaya, Nortel are all bit players in comparison.
    Both Polycom and Tandberg have good interoperability with other standards based systems, which Cisco, for example, doesn?t. Cisco-Cisco works fine. Cisco-others doesn?t. That?s why they lost the ~$45m Regus account.
    sramana@...
    • I agree.

      HP or perhaps Dell.

      I can't imagine Apple being interested at all. Although it has actually been quite interesting to see the extent to which end-users around here have been turning to Macintosh OS-X video conferencing over the past year or two. While video conferencing is way up around here overall (largely owing to the economy), demand for time on our MCU's is dropping.

      It seems that a lot of clients are quite happy to be empowered by using the serious quality of iChat A/V particularly since Leopard introduced very decent recording capability. H.323 is on its way out and SIP is on the way up. My clients have learned how simple SIP can be to use by their experiences with iChat A/V, Skype, etc.. Cisco should take notice. The bane of H.323 VC is firewall issues.

      It is just a matter of time until SIP supports the functionality of H.323 (PTZ, etc.). So perhaps Polycom is more likely to be a good target for someone heavily invested in SIP services?
      r.u.FED.up.2
  • RE: Polycom: A potential takeover target following Cisco-Tandberg deal

    Why should HP buy Polycom? They already have Halo and other video products. HP would do well to conserve their funds. Polycom won't survive in the long run against the big boys.
    santaclara88
    • Big boys?

      What big boys?

      Are you talking about Cisco or HP or someone else?

      Polycom *is* the BIG BOY in this niche. Cisco probably would have
      gone after them if the price tag was commensurate to their objectives.
      But Polycom's financials are pretty strong too. That along with the
      most complete product-line and most current technologies makes
      them a pretty big acquisition.

      This may change after a couple of years of erosion on the margins if
      Cisco are in fact more successful than Tandberg were at marketing
      Tandberg's own products. Otherwise Polycom's market share should
      hold up along with its margins. Personally, I don't think that HP is
      much of a player in this market and given their relative cash position,
      they aren't quite ready for taking on Polycom as an acquisition right
      now.

      But I agree that HP are well suited for this in terms of the range of
      markets they serve and incompleteness of their current product
      offerings. If you don't understand how HP's current video conference
      offerings are more "dabblings" then you probably should not be
      commenting here. I'd be curious to know what's going through IBM's
      corporate mind right now. They keep pushing forward in the software
      and services side of the business but personally I think they could do
      with some additions closely linked to their service technology market
      agenda.
      r.u.FED.up.2
  • RE: Polycom: A potential takeover target following Cisco-Tandberg deal

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