Cisco to buy WebEx for $3.2B

It's looking to push its unified communications strategy to smaller firms

Cisco Systems Inc. announced today that it would acquire WebEx Communications Inc. for $3.2 billion. WebEx makes on-demand collaboration software.

Cisco said the company's network-based technology will help it extend its unified communications strategy, particularly for small and medium-size businesses.

"As collaboration in the workplace becomes increasingly important, companies are looking for rich communications tools to help them work more effectively and efficiently," Charles H. Giancarlo, chief development officer at Cisco, said in a statement. "The combination of Cisco and WebEx will deliver compelling solutions accelerating this next wave of business communications."

He said WebEx's technology and services should complement Cisco's efforts, "while providing Cisco with a new and unique business model to expand its presence in the fast-growing SMB market."

"Cisco's global reach and customer focus will help us extend our core Web collaboration applications and continue to broaden the services we offer through the WebEx Connect platform," said WebEx CEO Subrah S. Iyar.

WebEx offers technologies and services that allow companies to hold real-time and asynchronous data conferences over the Internet, as well as share Web-based documents and workspaces. The company's subscription-based services strategy is seen as a key to its success.

Cisco said it plans to preserve that business model after the acquisition, which still needs government approval.

The deal is the third acquisition in recent weeks for Cisco, which announced March 13 it would buy the file storage management company NeoPath Networks and said March 5 it had purchased a share in Utah Street Networks Inc., the operator of the social-networking site Tribe.net. Both companies were privately held, and Cisco did not announce the terms of those deals.

The WebEx merger marks another step in Cisco's effort to diversify from its core business of building switches and routers that control Internet data traffic.

"Collaboration has been a big push for Cisco in the last 12 to 18 months," said Scott Sinclair, an analyst with Technology Business Research Inc.

Acquiring WebEx should help Cisco to expand from its usual territory in the enterprise market into the consumer and small and medium-sized business markets, Sinclair said. The merger plays into Cisco's recent moves to build a greater holding of social-networking tools, such as the Tribe.net deal, and a similar acquisition in February of Five Across Inc.

The deal is not expected to close until the fourth quarter of Cisco's fiscal year.

Ken Mingis contributed to this report.

Copyright © 2007 IDG Communications, Inc.

 
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