Posted by: Peter Burrows on March 15, 2007
When I got a call from Cisco PR at 6:00 AM this morning advising me that a press conference would start in ten minutes, I knew it was an important acquisition. Had Cisco taken out long-term router rival Juniper, which is widely considered takeover bait? Had Moto’s board decided to sell its Networks and Enterprise division, to help get Carl Icahn off its back? Maybe Cisco was going to buy into the increasingly strategic “edge” of the network, by buying Tellabs or a pre-public company such as Calix (Insiders say Calix has had the numbers to go public for months—and CEO Carl Russo has experience getting Cisco to cough up a big premium in advance of an IPO. He did it as CEO of Cerent, which he sold to Cisco in 1999 for $6.9 billion).
Of course, I was wrong. I was thinking of Cisco the pipes company, that specializes in the gear that makes it possible to move bits from here to there. But this deal is more evidence--maybe the strongest evidence yet--that Cisco wants to be more than just the company that helps others turn those bits into useful services. In fact, maybe it wants to be that service provider itself, at least in certain markets.
To be sure, the company has been evolving from a pure pipes company for a long time. Buying wireless home router maker Linksys in 2003 and cable set-top box maker Scientific Atlanta in 2005 gave it hardware to reach hundreds of millions of consumers. It's VoIP phones are used by millions more, and it has rolled out a slick new telepresence system.
But WebEx seems different to me. With the possible exception of the telepresence stuff, all of those deals were still more about infrastructure than end-user services. Even Cisco's recent purchase of social networking firms Utah Street and Five Across were done not so Cisco could set itself up as a corporate Myspace, but to provide technology so other corporations can do that for themselves.
With WebEx, there's no confusion: it's a destination online application that's used by millions. So if Cisco is willing to take on Microsoft in the web-conferencing space (remember that Microsoft is No. 2 in that market, with its Live Meeting product), what could be next? Now, I'm wondering if Cisco was in the sweepstakes to buy TellMe Networks, which Microsoft bought yesterday (In any case, as Om Malik points out, the WebEx deal is clearly an escalation of competition between Cisco and Microsoft). Would this new Cisco have been interested in buying Skype, if it hadn't already been bought by eBay? Heck, given Cisco's focus on digital media, might it consider making a run at a Net TV platform--say, by buying Joost, the latest creation of Skype founders Niklas Zennstrom and Janus Friss, before it gets too preposterously expensive.
Let me hear your thoughts and/or suggestions!