Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
PLUGGED IN: Cisco Might Not Suit WebEx by Mark Veverka
Summary: Cowan software analyst Peter Goldmacher thinks WebEx Communications (WEBX) will be making the wrong move if it sells itself to Cisco Systems Inc. (NASDAQ:CSCO) for its $3.2 billion/$57 a share offer. To be sure, the price (28x 2007 free cash flow) is reasonable. But Goldmacher thinks networking giant Cisco doesn't really understand nor have the wherewithal to capitalize on the "on demand" data software that is WebEx's strong suit. Enterprise software giants such as International Business Machines Corp. (NYSE:IBM), SAP AG (NYSE:SAP) or Oracle Corp. (NASDAQ:ORCL) could do a far better job growing out WebEx's applications that allow workers to share information simultaneously. WebEx CEO Subrah Iyar insists that Cisco does understand the potential of on-demand, and says he doesn't think he's selling his company's potential short. He also says Cisco told him they would enter web-based collaboration with or without WebEx. Goldmacher speculates a counter-offer may be in the making.
Related Links: Cisco's Quest to Conquer the Networking World • Cisco On the Acquisition Hunt: What Does it Hope to Accomplish? • Cisco to Acquire WebEx: Why I Love This Deal • Cisco's WebEx Acquisition Signals New Model Aimed At Microsoft • WebEx Communications Q4 2006 Earnings Call Transcript