Summary
Cisco buying Tandberg and Starent balances end-users and providers in complementing products, using cash, and confronting competition.
Analysis
Cisco acquisition of Starent Networks after buying Tandberg shows three advantages: 1) Balancing both end-users and network providers; 2) Using cash for proven businesses instead of speculative R&D of new products; 3) Complementing current products and gaining competitive strength. With Tandberg, Cisco is closer to end-user desktop applications instead of relying on their existing enterprise videoconferencing solutions. And with Starent, Cisco is in front of network providers.
Cisco’s CEO seemed bold in bragging about the $33 billion in cash during the last quarter’s results. But the benefits of Tandberg and Starent are that they both have loyal customers and proven technology. Cisco gets a customer base and complementary technology to grow. The investment makes more sense than investing in R&D for prototype products with uncertain or long time-to-market. For video conferencing, Cisco reduces the dependency on Radvision and gains strength in competing against Polycom and Microsoft. And while business and consumer spending is slow, Cisco can use Starent to pursue the stronger growth in 3G and LTE mobile networks to compete against Alcatel Lucent, Huawei and Juniper.
Gregg Kail, MBA consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
