Cisco to Buy Web Meeting Company

Image: REUTERS/Robert Galbraith

The deal drumbeat continues, with an announcement early today that Cisco Systems, the world’s biggest maker of the switches and routers that direct internet traffic, would pay $3 billion to buy Tandberg, a Norwegian Video Communications company.

The all-cash deal offers an 11 percent premium to Trandberg shareholders, based on Wednesday’s closing price.

Cisco’s move takes the company a step further into the video conferencing business, an area the company has been building up for the past several years. Cisco has been one of the more aggressive buyers in the tech marketplace, scooping up nearly 40 tech companies in the past five years, including the $6.9 billion purchase of set-top box maker Scientific Atlanta and the $2.9 billion buy of web meeting software maker WebEx.

Cisco already sells videoconferencing equipment, room-sized systems called telepresence.

Trandberg, though, makes smaller, cheaper conferencing units, and software for creating connections between conferencing systems that use differing underlying technology.

Cisco’s announcement comes at a time when more companies are wading back into the mergers and acquisitions market, after a long period during which the market was nearly dormant. With stocks moving higher, acquisition targets don’t feel they’re selling out at fire-sale prices, and buyers are eager to strike before the prices rise even higher.

On Monday alone, big deals added up to $13 billion worth of activity, as drug company Abbott Laboratories announced its purchase of Belgian firm Solvay SA’s drug business, and Xerox announced its purchase of Affiliated Computer Services Inc.

The value of deals announced in September was $48.6 billion, compared to $28.14 billion in August.

Most of the deals announced in the past month have been large, strategic plays by cash-rich companies – deals similar, in short, to the one announced today by Cisco.

What’s still missing from the merger market, though, are mid-sized deals, in the $300 million to $500 million range, that are backed by bank financing.