Attendees at today's SaaS Summit in Monterey — where I arrived last night after a mammoth 19-hour journey via London underground, Virgin Atlantic and Hertz rental car — were feeling bullish but bemused at the news that Cisco has bought WebEx for $3.2 billion. Knowing that WebEx sold for close to a 10x multiple of revenues is a boost for the valuation of any SaaS vendor. "The valuation premium on recurring revenue is clear," was the verdict of one well-known ISV that has recently entered the SaaS sector.
The deal had come as a bolt from the blue, though, and no one was sure quite why it had been done. By sheer coincidence, I'll be on site at WebEx tomorrow for the first in a series of webcasts I'm recording with some of the company's customers (WebEx is a client — see disclosure page). But until the deal has formally closed, I'm not likely to find out any more than has already been publicly stated. So I may as well publish my thoughts on the acquisition tonight. I'll limit myself to three quick points.
It will be interesting to see whether WebEx Connect will continue to get investment once Cisco takes control, and what will happen to the Cordys relationship that provides some of the underlying technology. My take is that it's Cisco's view that the Connect and WebOffice side of the WebEx business is where the greatest value remains to be unlocked.
Previous postings on WebEx, WebOffice and Connect.
PS [added 7am Mar 16th]: David Terrar points me to Frank Gens' short commentary, which highlights the SMB angle in this, which is important. And I see Kevin Werbach has posted an interesting verdict: "Cisco is either being brilliant or idiotic. I incline toward the former ..."
PS [added Mar 17th]: Tim O'Reilly makes some good points in his reaction to the acquisition. In particular, he picks up on Steve Borsch's posting on Connecting the Dots about the relevance of WebEx's MediaTone network to Cisco, and endorses the intriguing suggestion that Cisco could make MediaTone available as a utility service in a similar way to Amazon's S3 and EC2 services. That would certainly be a really interesting outcome.