Cisco to Acquire WebEx: Why I Love This Deal

Cisco (CSCO) plans to buy WebEx (WEBX) for $3.2 billion in cash. Under the terms of the deal, expected to close in the fourth quarter, Cisco will purchase all outstanding shares of WebEx for $57 a share. Last I checked WebEx shares were at $56.38.

I love this deal. Webex, as I have written in several previous posts, is perfectly aligned with the Enterprise 3.0 trends and the SME growth market trends, and has overall done a great job executing on a simple value proposition: web conferencing and online collaboration. [The Enterprise 3.0 framework is here.]

Cisco has recently been making moves into video conferencing (Telepresence product line), and other collaboration areas and I think this acquisition would give them exactly what they need to become a big player in the area and move upstream, challenging Microsoft’s (MSFT) strongholds. (Recently, Webex has even announced a SME hosted email offering a la Gmail.)

In terms of the competitive landscape in online collaboration products, Microsoft and IBM (IBM) both have fairly comprehensive suites. The best Webex competitor is with Adobe (ADBE), a business that, in my opinion, does not belong in that company and should be divested. If it is divested Oracle (ORCL) or SAP (SAP) could buy it, as both companies need to beef up their collaboration strategies.

But clearly, with the Webex acquisition, Cisco has bought itself a great opportunity to be a big player in Enterprise 3.0, coming at it from the communication layer while the others come from the application layer. It is true that, as far as collaboration is concerned, the application layer and the communication layer are converging, and it would be interesting to watch how Cisco would take advantage of its kingpin position in the communication eco-system to further the Webex cause.