Time for Cisco to Make Some Acquisitions? 13 comments
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After beating quarterly earnings but warning of a rough quarter ahead, John Chambers appeared a bit chastened and wary of the future. And he should be -- IT infrastructure builds will definitely suffer in the near term as the world rides out this rough recession / depression. one of the longest lived CEOs of any tech company, predicted his company would endure a 20% drop in sales for the third quarter of 2009. The Piqqem Sentiment on Cisco (CSCO) was moderately positive with sentiment estimates placing shares in the $17 to $18 range, slighly up from current levels. But Chambers, like Rahm Emanuel, is a CEO who never lets an economic crisis go to waste. So expect the giant networking firm to start an acquisition binge using its stock, which has weathered the market better than the shares of many of its potential targets. Cisco's $29.5 billion in cash and short term investments is another easy source of funding. Here's a few of the possibles.
- Riverbed Technologies (RVBD) - This provider of WAN optimization gear and other networking and security equipment is selling at nearly half-off its 52-week high of $23.25. It's current market capitalization of $800 million and change is barely a speed bump for Cisco. Riverbed has great technology and very strong presence in Europe. Company just beat earnings.
- BlueCoat Systems (BCSI) - The company builds security systems for businesses that filter traffic. It also builds WAN optimization gear. The products overlap in some places with Riverbed. At $10.92, BCSI is well off its 52-week high of $31.8. The company has struggled and lowered guidance in recent quarters but the vaunted Cisco sales force and VAR network could likely goose distribution nicely. Cisco is also very strong in security and this tuck in would only set chambers back roughly $500 million.
- Polycom (PLCM) - This is the leading player in the rapidly growing video conferencing market. Polycom sells systems across the spectrum, whereas Cisco is primarily selling expensive videoconferencing gear. There would be a lot of overlap between the two -- Polycom also sells IP handsets -- but Cisco has yet to make a big play in this segment for the SMB market, which could be the fastest growing. With shares at roughly half 52-week highs, Polycom just announced a beat-and-raise that has slighly boosted shares, making it a bit more of a mouthful but still digestible at a market capitalization of $1.24 billion.
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This article has 13 comments:
As per the BlueCoat and RiverBed, I dont think Cisco will acquire another company whose product line overlaps with existing Cisco products.
On Feb 09 11:55 AM stockfan wrote:
> Cisco already OEMs some gear from Polycom. Why buy the company to
> claim what little margins are left on the Polycom side. Polycom isn't
> a big player outside of their OEM devices. Also, Cisco has a full
> line of VoIP products for SMB all the way up through Enterprise.
> There isn't much of a product gap if any that needs to be filled
> with an acquisition in voice.
On Feb 09 09:56 AM TwoFingerPoi wrote:
> Software that expands further into new markets related to the data
> center. The blade server initiative in partnership with VMware and
> BMC is a program that is very strategic that would benefit from supporting
> acquisitions. I think a larger acquisition is possible to support
> this initiative and BMC is a likely target.
I think you're thinking of Tandberg's acquisition of Codian, the HD video bridge maker. Codian was a smart buy for Tandberg, they needed infrastructure.
Cisco is strong in infrastructure, but their endpoint (telepresence) systems are expensive and proprietary. They need to play in the standards-based world.
On Feb 09 02:22 PM Alex Salkever wrote:
> Cisco has products but very little penetration in SMB -- they are
> viewed as a big dollar player. Tandberg scooped up Lifesize, which
> was the easiest play to that market but Polycom is a lot closer than
> Cisco in mindshare and in product offerings. Since SMB will likely
> be the big growth engine, Polycom makes sense for them there.
The next big thing is video on Cellphone, PLCM already has solution.
AAPL will release iPhone with real time video which will lead smart phone again
On Feb 09 02:22 PM Alex Salkever wrote:
> Cisco has products but very little penetration in SMB -- they are
> viewed as a big dollar player. Tandberg scooped up Lifesize, which
> was the easiest play to that market but Polycom is a lot closer than
> Cisco in mindshare and in product offerings. Since SMB will likely
> be the big growth engine, Polycom makes sense for them there.
Thanks a lot!
My take is that Polycom, Tandberg or Cisco will make a play for Lifesize to get them out of the market...let's face it...there is only two players in VC today - Polycom and Tandberg.
Both Polycom and Tandberg will be purchased by a Microsoft, Cisco, Avaya (via Silverlake) like company moving forward. Most of the major UC players know they need a very strong video story and most don't have one.