Cisco moves deeper into Microsoft territory with WebEx

by Kris_Tuttle on March 15, 2007

On the heels of the Microsoft announce­ment to buy TellMe yes­ter­day Cisco has agreed to acquire WebEx for about $3B in cash. This is also our first com­pany in our Web20 index to be acquired so we will need to select a new one in the com­ing months as this deal closes.

Microsoft and Cisco have had an awk­ward dance of coop­er­a­tion and com­pe­ti­tion over the years since the first Microsoft Active Direc­tory was launched a decade ago. Today this inter­ac­tion is get­ting more heated as col­lab­o­ra­tion becomes cen­tral to cor­po­rate IT activ­i­ties. Microsoft had acquired Place­ware some­time ago is #2 in the mar­ket after WebEx.

WebEx has a net­work of 3000 servers and over 2M sub­scribers who use their tech­nol­ogy as an on-demand plat­form for col­lab­o­ra­tion. Cisco sees that uni­fied col­lab­o­ra­tion and com­mu­ni­ca­tion are grow­ing fast and par­tic­u­larly impor­tant in the SMB mar­ket when it can be offered in a SaaS format.

With $380M in C06 rev­enues Cisco is pay­ing about 7.6x TTM sales. Guid­ance calls for minor reduc­tions to earn­ings in F07 and F08 with addi­tions com­ing in F09. Because WebEx has estab­lished dis­tri­b­u­tion chan­nels, part­ners and a strong busi­ness model it will be run as a stand-alone busi­ness and inte­grated into Cisco oper­a­tions over time. This is said to rep­re­sent a “new model” for Cisco. It seems sim­i­lar to the VMWare struc­ture at EMC for now. Cisco is talk­ing about oppor­tu­ni­ties in the dis­tri­b­u­tion chan­nel but already has sub­stan­tial estab­lished chan­nels with resellers, direct and lower end prod­ucts like Linksys.

These moves raise more questions:

  1. If more and more peo­ple are going to use an expanded WebEx/Cisco plat­form to col­lab­o­rate does it mean for the usage of Microsoft Office products?
  2. Does this move by Cisco put more pres­sure on Google to add com­mu­ni­ca­tion col­lab­o­ra­tion to their Docs and Spread­sheets platform?
  3. Will all three of these ven­dors take steps to pro­vide bet­ter inter­op­er­abil­ity between their offerings?

Tagged as: Cisco, WebEx

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