The Web Conferencing Blog

Cisco to Acquire CoreOptics for $99M Cash

Cisco is to buy privately held CoreOptics, a designer of digital signal processing solutions for high-speed optical networking applications.

Under the terms of the agreement, Cisco will pay approximately $99 million in cash and retention-based incentives in exchange for all shares of CoreOptics.

The acquisition is subject to customary closing conditions and is expected to close in the second half of calendar year 2010.

CoreOptics’ product portfolio includes advanced 10Gbps and 40Gbps transponders for metropolitan, regional and long haul optical systems using different protocols.

Based in San Jose, with the majority of its employee base in Germany, CoreOptics will enable Cisco to equip service provider customers with 100 Gigabits per second (Gbps) transmission technology to scale their networks to “meet the demands of rapidly growing Internet Protocol traffic driven by video, mobility and cloud services”.

The acquisition of CoreOptics expands Cisco’s optical presence in Europe, building on its existing European operations in Monza, Italy. Upon completion of the acquisition, all 116 CoreOptics employees will become part of the Cisco Service Provider Technology Group.

CoreOptics, founded in January 2001, was backed with roughly $90 million in venture capital from multiple investors and strategic partners, including Crescendo Ventures, TVM Capital, GIMV, High Tech Private Equity, Atila Ventures, QUEST FOR GROWTH and T-Com Venture Fund.

By Robin Wauters

CoreOptics is the leading providers of 10G and 40G Distortion Tolerant Transponder Modules and IC solutions for Metro, Regional and Long Haul optical and data networking markets.

With a belief that optical communications networks must become open systems that economically transmit information regardless of data rate or fiber types, CoreOptics provides the only field-proven MLSE-based equalization solutions on the market today. This innovative technology helps Tier 1 systems vendors and carriers deploy the next generation of high-performance networks using their existing fiber infrastructure.

CoreOptics’ 10G and 40G Distortion Tolerant Transponder Modules eliminate the need for Optical Compensators and the respective Second Stage Amplifiers, allowing customers to reduce their first-in deployment cost by up to 30%.

Cash Rich Companies

Cisco Systems is still the cash king of all companies, leading the way with $39.6B in the bank. (Cisco recently closed a $3B acquisition of Tandberg.)

Other notable cash rich companies:

• China Mobile: $38.7B
• Microsoft: $36.1B
• Google: $26.5B
• Apple: $23.2B
• Samsung: $18.6B
• Oracle: $17.5B
• Sony: $16.5B
• Intel: $16.3B

Possible acquisition targets:

• VMWare
• Salesforce.com
• McAfee

Source: Bloomberg

Cisco and Tandberg Deal Closes

Cisco continues to back it's Video/Telepresence/Collaboration strategy by officially closing the acquisition of Tandberg, the leading video endpoint and network infrastructure provider. With a $34B collaboration market opportunity, combined with the tremendous demand for video over the internet and network, tCisco is poised to capture a huge chunk of the market.

Marthin De Beer, SVP, Emerging Technologies Business Group stated, "Just three years ago, we incubated Cisco TelePresence as an Emerging Technology. Cisco TelePresence recently crossed the chasm, and together Cisco and TANDBERG are now poised to become a leading global innovator in the rapidly growing collaboration market. Together we can better enable our customers to completely transform how they conduct business—from the desktop to the boardroom, and into many new environments with new experiences. The future is here now with Cisco TelePresence"

Cisco conducts about 30,000 Cisco TelePresence sessions and approximately 558,000 WebEx meetings per month, while all TANDBERG employees have video phones on their desk and participate in 100,000 video calls per month.

TANDBERG's 800-person sales, channels, and services teams will remain intact globally to ensure business continuity, reporting to Carl Wiese, VP Global Collaboration Sales. Nearly 1,600 qualified TANDBERG channel partners, will continue to offer TANDBERG solutions and will gain the opportunity to qualify to sell Cisco solutions. (Fredrik Halvorsen, formerly TANDBERG's CEO, has been named SVP/GM of this new group, reporting to De Beer.)

More Cisco Acquisitions...

In a few recent posts, I mentioned that John Chambers and the management team would be aggressively pursuing companies to acquire. Since March, when Cisco acquired the consumer-based HD video provider, Pure Digital Technologies, Cisco has locked in on 5 additional companies.

• November 2009: Set-Top Box Business of DVN Holdings. DVN markets digital cable solutions in China. This expands Cisco's "Cable" portfolio.
• October 2009: ScanSafe, a SaaS web security provider, compliments Cisco's on-premise content security solution via the IronPort acquisition in 2007. With the ScanSafe aquisition, Cisco has a cloud-based and on-premise-based security solution for customers.
• October 2009: Starent Networks, a provider of IP-based mobile infrastructure solutions and fits nicely into Cisco's focus on Mobility and Mobile Internet via IP-enabled smartphones and other mobile devices.
• October 2009: Tandberg, a major player in the video conferencing space. Tandberg will fall into the Cisco Collaboration Suite which already includes solutions like WebEx, Telepresence, and WebEx Connect. (Subject to close)
• April 2009: Tidal Software, a provider of application management and application performance. Tidal Software will help Cisco and its data center strategy.

We'll have to wait and see how many other companies are acquired in the next few months. I have a feeling it will be at least 5 more companies!

The power of having $35B cash in the bank.

Polycom an Option for Cisco?

As I previously mentioned, if the Cisco/Tandberg deal does not go through, Polycom could be a viable option...in my personal opinion.

According to "Videoconfernecing By the Numbers," by Wainhouse Research (Analysts: Andrew Davis and Ira Weinstein), Polycom ranks as the global leader for total installed group systems as of July 2009, representing 41% market share. (Tandberg has 26% market share.) For the first half of the year, Polycom is the leader with a 35% market share for shipped units. (Tandberg represents 35% market share across the same time period.)

Group systems is defined as all video conferencing systems, HD video conferencing, telepresence and does not include video phones and PC software solutions.

As stated in the report, "Although heavily impacted and exhibiting an annual revenue growth rate very diminished from its 2006-2007 high, the videoconferencing market appears to be weathering the economic storm reasonably well, and is better positioned than many other industries to prosper in a cost-cutting, carbon-emission-cutting environment."

Copy of the Report: Download Wainhouse Research VC by the Numbers

Cisco Plans to Buy Starent

John Chambers and the Cisco team is always on the hunt for high-value companies to acquire, especially in these economic times where companies can be bought at a significant discount.

On the heels of Cisco planning to acquire Tandberg, a leading provider of video teleconferencing solutions, Cisco just announced plans to acquire Starent Networks for $2.9B. (This equates to $35 per Starent share, a 21% premium to Monday's trading price.)

Starent is a maker of advanced wireless equipment and its product line will add to Cisco's continued efforts of expanding next-generation networks.

Cisco to Buy "Flip Video" Company

I was first introduced to "The Flip" video device from a friend of mine. We were at wedding and when our best friend and his new wife, broke out into the "Superman" dance for their wedding dance! Luckily, my friend had is handy dandy Flip ready and began recording immediately! It was awesome!

Pure Digital Technologies is the creator behind The Flip video device. Based in San Francisco, they have been in business for 7 years and as consumer video technologies have sky rocketed, so has the company's sales: estimated close to $15M in 2008. (The company has about 100 employees and is led by Jonathan Kaplan.)

Easy to use, even easier to upload video content onto the internet and it's only about $150.

With $30B in the bank and "Video" as a top corporate initiative from John Chambers: CEO, Cisco Systems is looking to possibly acquire Pure Digital Technologies. Rumor has it that the deal is worth more than $500M!

More to details to come...

Thanks,
David Chao
The Web Conferencing Expert

Cisco to Buy Jabber

Cisco plans to acquire enterprise instant messaging provider, Jabber, for an undisclosed sum. Jabber's IM technology is based on the open-source XMPP (Extensible Messaging and Presence Protocol) standard. The acquisition will of course better position Cisco in the unified communications space against the likes of Microsoft, IBM, and possibly Google.

A Cisco continues to market their unique value proposition: the ability to deliver both hosted and on-premise collaboration applications with the Cisco Intelligent Network at the core, the plan is to integrate Jabber into Cisco's on-premise unified communications suite and also into is cloud-based WebEx Connect application which was officially launch in late- September.

Because Jabber is built on XMPP, it enables a Jabber user to communicate across many different devices or applications such as MSFT Office Communications Server, IBM SameTime, AOL AIM, GoogleTalk, and Yahoo IM.

The Jabber team will join the Cisco Collaboration Software Group ie, WebEx.

Other recent Cisco Acquisitions:

• WebEx: #1 web conferencing provider in the world
• IronPort: messaging security software provider
• Securent: security software maker
• PostPath: email storage provider

Thanks,
David Chao
The Web Conferencing Expert

Cisco Intends to Buy PostPath

Cisco announced that it plans to buy PostPath, a Linux-based email, calendaring, and collaboration solution. This move further signifies Cisco's commitment to creating a comprehensive cloud-based collaboration platform.

Ferris Research analyst Richi Jennings thinks Cisco made a great deal. Jennings says, "Once again, Cisco makes a sound investment in an email technology vendor, just like it did with IronPoint," an email security appliance provider.

As for PostPath, Jennings says, "These are the clever guys who reverse-engineered the Exchange client protocol, MAPI/RPC, and the related on-the-wire details needed to make a vanilla install of Outlook talk to a non-Exchange mail server with full fidelity. Impressive stuff. Of all the other Exchange alternatives, PostPath has the most interesting architecture. And I say that as one who has years emotionally invested in the OpenMail technology" -- which served as the foundation for Scalix.

Looking at the deal itself, Jennings opines, "I think Cisco fell out of love with Microsoft a while back. Something to do with VoIP support in Exchange and how Cisco thought it was Microsoft's partner but it turned out that Microsoft was competing with them. Nothing familiar there at all...."

As for what Cisco plans, Jennings says, "Sounds like Cisco wants to offer SaaS collaboration, based on PostPath and WebEx. Whoever said the email world has become dull and uninteresting?"

Cisco will pay approximately $215 million in exchange for PostPath's shares. The acquisition is expected to be completed in Cisco's first quarter of fiscal year 2009. Upon completion of the acquisition, PostPath employees will become part of the Cisco Collaboration Software Group.

Thanks,
David Chao
The Web Conferencing Expert

Upcoming Cisco Acquisitions...

There is some speculation that Cisco (CSCO) is looking to make a few acquisitions in the very near future. Some think Cisco is targeting Brocade (BRCD) to thwart Brocade's own interest in acquiring Foundry Networks (FDRY) for $3B. By acquiring Brocade, Cisco would boost its storage networking portfolio and eliminate a competitive threat.

The timing is also good for Cisco as Brocade shares are down 12-15% since Brocade announced it would pay a 40% premium for Foundry Networks. The only obvious concern for Cisco is how the government will interpret Cisco's market share in the fibre channel switch space after a Brocade acquisition.

On the periphery, other analysts think Cisco might go after the data storage giant, EMC Corp (EMC). I personally think that waiting on this one would be a good idea. EMC has only been growing in single digits, probably not exactly what John Chambers is looking for in an acquisition. EMC also has a $30B market valuation, a buyout wouldn't come cheap to Cisco either. I'm not so sure if Cisco needs to buy the "size" of an EMC.

If Cisco does buy Brocade or some other "smaller" player in the fibre channel switching space, it will be a great compliment to the Cisco Nexus Switches product line which launched earlier this year.

Thanks,
David Chao
The Web Conferencing Expert