I was shocked the other day to learn about SilverLake Partners’ renewed interest in taking TANDBERG, the video communications endpoint manufacturer, private. This story first came up in the summer of 2008 but died away as it became clear that there may not be inexpensive debt available as the financial services sector fell into disarray in the 3rd and 4th quarters of 2008.
This project doesn’t make any sense to me. Usually Private Equity companies pick up tarnished brands with customers and products and takes them off the public equity markets in order to allow them to restructure their businesses – cut supply chain costs, reduce R&D costs and divert marketing away from winning new customers are three favorite tactics – to deliver predictable profits. It’s about mature management of companies serving mature markets all the while providing a steady hand on their operation to constantly generate profits.
TANDBERG is none of these.
It’s on a tear to break out of the video conferencing ‘box’ and has introduced hot new products for HD quality video on PCs, a new architecture in telepresence suites and great new configurations of its IP bridging technologies acquired as part of the well-integrated Codian deal. It’s well recognized as the leader in what is fundamentally a two-horse race (TANDBERG and Polycom) with particularly good offerings in the network infrastructure space including high density, high quality MCUs, despite Cisco’s efforts to change that dynamic. Furthermore, TANDBERG is well-managed, continuing to generate earnings improvements and extract revenue growth (single digit growth is quite respectable compared to Microsoft or Cisco which are both experiencing declining revenues) through very trying economic conditions.
SilverLake should save their coin for buying Nortel Enterprise or generating a rollup of smaller players to integrate with Avaya. How about Mitel which is already privately owned? How about ShoreTel?
