Tandberg deal reflects videoconferencing growth

Tandberg acquired videoconferencing equipment maker Codian for US$270 million.

A rising tide lifts all boats, and in the world of videoconferencing, Cisco Systems' high-profile TelePresence products are boosting the market as a whole. Longtime player Tandberg is trying to make the most of the good times.

In the latest move for market position, Tandberg said Thursday it plans to acquire privately held Codian, a maker of back-end infrastructure for other vendors' conferencing endpoints. The 107-employee company, based in Slough, U.K., will help Tandberg grab sales and develop new products faster, as well as go after new opportunities in the IP communications market, Tandberg said. It expects the US$270 million deal to close in the third quarter.

Cisco's TelePresence, introduced late last year, was practically all Cisco executives would talk about when they met with financial analysts this week, and with good reason: The technology costs up to US$300,000 per location and requires special design and installation work, but it looks and sounds great. Using it has already slashed Cisco's travel costs, Chairman and CEO John Chambers said. The marketing effort Cisco has been pouring into TelePresence has raised the profile of other telepresence systems such as Hewlett-Packard's Halo and Teliris' VirtuaLive.

These systems bring videoconferencing, traditionally complicated and low quality, to another level. In turn, they have put the spotlight on improvements in midrange videoconferencing systems that now feature high-definition cameras and displays and better sound.

"The attention has done more for HD videoconferencing than for telepresence," she said. "The price tag (on telepresence) is still prohibitive for most enterprises."

Whereas telepresence usually involves designing a whole room for a particular system, which can even include special furniture and room modifications, midrange high-definition videoconferencing may be installed in an existing conference room or as upgraded components to an existing system, IDC's Freedman said. These systems can be deployed for a fraction of the cost of telepresence.

Codian makes back-end infrastructure for conferencing systems, including MCUs (multipoint control units), gateways, content servers and management software, Tandberg said. Tandberg pledged to continue developing and supporting both its own and Codian's product lines even though both companies make, for example, MCUs.

Tandberg, based in Oslo, is already working with HP to let users hook up its high-definition desktop videoconferencing systems with Halo conference rooms.

Although the telepresence market is still a "corporate jet replacement" for top-level executives, the market isn't standing still, Freedman said. IDC estimated telepresence sales worldwide were just US$64 million in 2006, but believes they will rise to US$170 million this year and to US$1 billion by 2011.

Polycom, which makes a broad range of conferencing products including a telepresence system, moved to grab more of that market early this year when it acquired Destiny Conferencing for US$47.6 million. The 27-employee company was already supplying core technology for Polycom's RPX telepresence product and held several patents in the area.

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