Cisco wins TelePresence deal; Tandberg deal OKed

NEW YORK/BRUSSELS Mon Mar 29, 2010 5:05pm EDT

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NEW YORK/BRUSSELS (Reuters) - Cisco Systems Inc claimed two major victories on Monday to secure its position as the world's top videoconferencing provider: a big sales contract for its high-end video system and regulatory approvals for its acquisition of Norway's Tandberg.

Cisco (CSCO.O) said it won a multi-year deal to supply TelePresence systems to Bank of America (BAC.N), reflecting the growing popularity of advanced, video communications systems.

TelePresence aims to create the experience of face-to-face meetings through high-definition video technology.

While San Jose, California-based Cisco is best known for its routers and switches that manage Internet traffic, the company has been expanding into new areas like video technology to fuel long-term growth.

The company said 200 units of TelePresence will be deployed across Bank of America's global operations by the end of the year, with more expected in the following years.

It did not reveal how much the deal was worth, but analysts said it was likely well over $40 million. Cisco's high-end videoconferencing systems cost around $250,000 per unit.

"We speculate this deal to be in the range of $50 million, including services, which would be the largest TelePresence deal by far," said Jason Ader, an analyst at William Blair & Co.

Bank of America said TelePresence would help reduce the need for travel, which would cut costs and help its workers better manage work-life balance.

"These is an impressive win in our view, and highlights an inflection point in the video collaboration market as companies are searching for solutions to become more efficient through collaboration and video technology," Ticonderoga Securities analyst Brian White said in a research note.

The size of the deal did not appear material considering Cisco's revenue of around $10 billion a quarter, but Ader said it was "significant nonetheless as we believe it signals that videoconferencing and TelePresence are starting to move into a phase of more mainstream adoption."

CISCO-TANDBERG

The announcement came after Cisco secured EU regulatory approval for its acquisition of Tandberg TAA.OL, a deal worth over $3 billion.

The deal, first announced last October, makes the world's biggest network equipment maker the biggest videoconferencing company as well.

The approval was conditional on Cisco ensuring the compatibility of the video products with those of its competitors.

The U.S. Justice Department also said it will not challenge the deal, which Cisco said is expected to close in the coming weeks as all necessary regulatory approvals have been granted.

The videoconferencing sector has lately experienced a flurry of acquisitions and is seen as a key growth area as companies seek to cut travel costs and innovate by installing, for example, remote customer service stations.

Tandberg has a 40 percent share of the mid-tier videoconferencing market, and its products are seen filling a gap between Cisco's TelePresence systems and WebEx desktop video service.

Cisco estimates the total value of collaboration tools, including everything from videoconferencing to conference calls to Google (GOOG.O) Apps, to be worth about $34 billion.

(Additional reporting by Jeremy Pelofsky; Editing by Dave Zimmerman and Richard Chang)

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