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Competition is heating up in the video conferencing market with today’s announcement that Cisco (News - Alert), the world’s largest maker of computer networking gear, would buy Norway-based TANDBERG for about $3 billion.

 

As a result of the merger, video conferencing providers such as Polycom will face a more challenging playing field, industry experts said. The purchase, which reportedly is Cisco’s first acquisition of a public company outside the United States, is expected to give Cisco a boost in the video conferencing sector, which TANDBERG and Polycom have largely dominated.

 

The acquisition opens up the mainstream market to Cisco, which will now go head-to-head with Polycom (News - Alert). TANDBERG represents 40 percent of the video conference market, where as Polycom represents 34 percent, according to Wainhouse Research.

 

“It’s a two-horse horserace with Cisco/Tandberg versus Polycom,” Ira Weinstein, senior analyst and partner, Wainhouse Research LLC, told TMCnet in an interview today. “For Polycom, this means that a company that was already difficult to compete with is now going to be much more powerful. This is going to make the playing field more difficult for them.”

 

“This will change the discussions of every video conferencing deal going forward,” Weinstein added.

 

But there’s a silver lining for Polycom. Some of the other unified communications players that previously dealt with Cisco and TANDBERG will “probably start hugging Polycom a bit harder,” Weinstein said.

 

Roopam Jain, a principal analyst in Frost & Sullivan's (News - Alert) conferencing and collaboration practice, echoed Weinstein’s thoughts.

 

“This acquisition poses challenges for Polycom and other companies in the videoconferencing world,” Jain told TMCnet in an interview. “Matching Cisco's visibility and marketing muscle will be difficult for Polycom. However, Polycom has a long history in the video conferencing market and has a strong customer base. If Cisco's acquisition of Tandberg slows down the agility in innovating and servicing its customers that Tandberg is known for then that would be a window of opportunity for Polycom to move in and capitalize on the growth opportunities.”

 

And Polycom officials agree.

 

“We think this will further strengthen our relationships with other key partners,” Joan Vandermate, vice president of marketing of the video solutions group at Pleasanton, Calif.-based Polycom told TMCnet in an interview. “Polycom remains focused on delivering the best possible solutions and services to the marketplace. We will continue working with our partners to help our customers address their real-world challenges such as globalization, increasingly dispersed and mobile workforces, and the need to reduce carbon emissions.”

 

Vandermate said the acquisition opens up the door for Polycom to be the “only independent provider of scale.” For example, Tandberg will be tied to Cisco’s Call Management platform, which represents 11 percent of the global call management market while Polycom will run unopposed in 89 percent of customer opportunities, she said.

 

“This benefits our partners because they can now sell Polycom solutions to customers who rely on Avaya, BroadSoft, HP, IBM (News - Alert), Microsoft and Siemens for their UC solutions,” she said.

 

TMC CEO Rich Tehrani said in his blog today the deal will undoubtedly “put pressure on [Polycom] but could also open up gaps in the market which can be exploited as Cisco digests this large video meal.”

 

Under the deal, Cisco plans to integrate TANDBERG’s video endpoints and network infrastructure solution into its collaboration architecture, allowing intercompany and multi-vendor interoperability across its product portfolio. Cisco officials said the acquisition would help strengthen the company’s position in the $34 million collaboration market and expand its presence as a player in the videoconferencing sector.

 

When the merger is complete, TANDBERG CEO Fredrik Halvorsen will lead the new so-called “TelePresence Technology Group” and report to Marthin De Beer (News - Alert), senior vice president of Cisco's Emerging Technologies Group. The acquisition is expected to close in the first half of 2010.

 

The acquisition signals growing interest in the video conferencing field.

 

“It validates the fact that video conferencing in the enterprise has finally arrived,” Jain said.

 

TANDBERG, which operates joint headquarters in Oslo, Norway, and New York, offers telepresence, high-definition videoconferencing and mobile video products and services. The company designs, develops and markets systems and software for video, voice and data communication. The firm has 1,500 employees worldwide.