In a move aimed at increasing its dominance in the video conferencing and online collaboration market, Cisco has agreed to purchase Norway's Tandberg ASA for a price of $3 billion in cash.
Cisco, which incidentally is the largest manufacturer of networking equipment in the world, believes that purchasing Tandberg, which currently holds a significant share of global video conferencing market, fits into its long term growth strategy.
It is important to note that Cisco already sells a sophisticated range of "TelePresence Systems" which essentially aim at providing conference participants with a real life quality; in addition it also offers the popular WebEx online meeting software which is currently used by millions across the world.
Many analysts believe that as companies tend to cut down on travel costs, demand for video conferencing will grow and Cisco plans to position itself as the primary solution provider for all online collaboration needs.
The acquisition by Cisco is unlikely to significantly affect its balance sheet as it currently has a huge cash reserve of around $35 billion, much of which is with its subsidiaries outside the US.
Since its cash reserves outside the US cannot be brought back without paying a large tax penalty, Cisco will be increasingly using the same for strategic acquisitions.
Shares of Cisco fell yesterday although the prices went up in after hours trading. Cisco and Tandberg have a long running partnership and produced their first product back in 2005. Through a number of acquisitions, Tandberg has also managed to grab some interesting patents and technologies.