Home / Cisco splashes out US$3.2 billion to snap up WebEx

Cisco splashes out US$3.2 billion to snap up WebEx

Networking giant Cisco has beefed up its unified communications vision with the purchase of collaboration specialist WebEx for US$3.2 billion.

Networking giant Cisco has beefed up its unified communications vision with the purchase of on-demand collaboration applications supplier WebEx for US$3.2 billion. Cisco claims that the deal will extend its vision of unified communications solutions, especially in the fast-growing SMB space.

“As collaboration in the workplace becomes increasingly important, companies are looking for rich communications tools to help them work more effectively and efficiently,” said Charles H. Giancarlo, chief development officer at Cisco. “The combination of Cisco and WebEx will deliver compelling solutions accelerating this next wave of business communications.”

“Cisco believes the network is a platform for all forms of communications and collaboration, and WebEx’s technology and services portfolio complement Cisco’s leadership in the unified communications and collaboration market, while providing Cisco with a new and unique business model to expand its presence in the fast-growing SMB market,” Giancarlo continued.

Under the terms of the deal, Cisco will launch a cash bid of US$57 per share for all outstanding WebEx shares and take on outstanding share-based awards. The total purchase price is approximately US$3.2 billion, or US$2.9 billion net of WebEx’s existing cash balance.

“Cisco and WebEx share a vision of web collaboration as a key to accelerating business processes and critical to durable competitive advantage,” said Subrah S. Iyar, CEO of WebEx. “Cisco’s global reach and customer focus will help us extend our core web collaboration applications and continue to broaden the services we offer through the WebEx Connect platform.”

WebEx’s solution portfolio includes technologies and services that allow companies to engage in real-time and asynchronous data conferences over the internet. Using a subscription-based services strategy, which Cisco plans to preserve, WebEx solutions also allow companies to share web-based documents and workspaces designed to improve the productivity, performance and efficiency of workers.

Cisco’s decision to purchase WebEx highlights the vendor’s belief in the growing importance of new web technologies and collaboration tools. As if to reinforce this point, Giancarlo offered more detail on the rationale underpinning Cisco’s decision to splash its cash on WebEx in his corporate blog.

“Many pundits are trying to define Web 2.0 or even predict Web 3.0,” wrote Giancarlo. “What Web 2.0 means to me is straightforward: Web 2.0 technologies allow users to collaborate directly over the open platform of the internet… collaborating with video, voice and information 24 hours a day, 24 time zones around the world. Web 2.0 is perhaps most evident in the consumer marketplace with social networking sites, mash-ups and video sharing services. This is the ‘play’ part of Web 2.0.”

“But this collaborative technology will make huge advances in the business effectiveness with online collaborative tools like WebEx’s. WebEx was one of the early leaders in this market and remains a leader 10 years later, making inter-company collaboration accessible and easy for their customers,” he added.

“Cisco is an innovation company and the philosophy at the core of our innovation strategy is to use the ‘network as a platform’ for the next explosion in business and consumer applications. WebEx fits this philosophy exactly, as their technology is network-based and hides complexity from not only users, but from their IT organisations as well,” the blog continued.

2,200-strong WebEx, which was founded in 1995, recorded sales of US$380m in calendar 2006. Once the deal is closed WebEx will become part of Cisco’s development organisation with Iyar reporting directly to Giancarlo.

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