On March 15, Cisco announced the acquisition of WebEx. This $3.2 B deal is Cisco's third biggest deal. The other two were Scientific-Atlanta ($6.9B) in November 2005 and Stratacom ($4B) in 1996.
Cisco doesn't normally do big deals. As a rule, the company has tended to purchase companies with unique and market leading innovations and then propel them into the company's vast distribution and sales network. This deal is interesting because it's the company's first foray into hosted services.
Brockmann rating on this deal is as follows:
Strategic fit [4/5]. Web conferencing is a great complement to Cisco's MeetingPlace product, and a way to blunt the competitive leverage by Microsoft of the hosted service domain. Statistics gathered at an analyst firm that I used to work at (more on this on another post), showed that there are many Cisco customers who are not WebEx customers and many WebEx customers who are not Cisco customers. I thought that there would be a much greater overlap than what I saw in this data.
Timing [4/5]. Now is the time for collaboration. This is the second most important driver to the adoption of Unified Communications, and Cisco is well positioned to reduce the barriers between both the telephony and the web conferencing functions of UC.
Customer demand [3/5]. The integration of these technologies with Cisco Unified portfolio will be important ways to blend the overlap opportunities. Enabling a click to WebEx, or a WebEx to call will be important custom integrations that would give Cisco customers value. No doubt there will be many good ideas for coupling the service and the products that will further differentiate the Cisco gear from the gear competitors, and the conferencing services from the service competitors.
Potential [2/5]. I estimate the synergy at less than $100 million/year. If the goal is for Cisco to sell more as a result of the combination, the shareholders will be disappointed. However, if WebEx becomes a platform for hosting of other UC-type services like Lotus SameTime and Cisco Unified and telepresence, there may be a lot higher grade here for them on this point.
Overall: 13/20 = 65%.
