Thursday, 1 October 2009

Cisco conferences in Tandberg

(By Anthony Miller – Thursday 1st October 2009 9:00am). At last – an acquisition that actually seems to make sense! Cisco (no introduction needed) is to buy Norwegian video-conferencing player, Tandberg, for $3b cash. The NKr153.5 per share offer is at an 11% premium to yesterday’s close and some 25% over Tandberg’s 3-month average. Tandberg’s revenues last year were just over $800m (+28% yoy), and they ran a 22% EBIT margin. Last month Cisco reported FY09 revenues of $36b (-9% yoy) at a 20% margin, though its Q4 was a bit woeful (see Cisco at "tipping point"?). Cisco spent much the same ($3.2b) to buy webcasting company WebEx back in March 2007.

I’m no videoconferencing expert, but as best as I understand it, Cisco plays at the high end of the ‘telepresence’ market, whereas Tandberg (didn’t they used to make great tape recorders?) looks after the mid- and low end. OK, Cisco is paying 4x revenues and 18x EBIT, but surely this is worth it for what appears to be a perfect fit?

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