Skype deal raises risks for videoconferencing firms

Thu May 12, 2011 4:20pm EDT

Related Topics

* Microsoft Skype buy risk for videoconference gear firms

* Polycom, Logitech are most exposed-analysts

* Market grows most in desktop video apps, top-end rooms

* Polycom shrugs off risks to its Microsoft partnership

By Tarmo Virki, European Technology Correspondent

HELSINKI, May 12 (Reuters) - Microsoft's (MSFT.O) $8.5 billion acquisition of Skype is likely to boost videoconferencing from workers' desktops, posing further risks to video technology providers like Polycom (PLCM.O) and Logitech LOGN.VX.

The cheaper end of the $3 billion videoconferencing equipment market is already suffering from inroads that Skype and other video applications are making in the market, historically controlled by stand-alone conferencing devices in offices.

The pressure on dedicated videoconferencing devices, excluding top-end telepresence rooms, will only increase, said Gartner analyst Jeffrey Mann.

Dominic Dodd, analyst at Frost and Sullivan, agreed.

"Some of the more narrowly focused companies will likely struggle," Dodd said.

Analysts said companies like Polycom and Logitech were first in line to be hit if Microsoft succeeds in turning Skype more towards enterprises, while companies like Cisco (CSCO.O) and Hewlett-Packard (HPQ.N), which have wider offerings and focus more on the fast-growing high-end of the market, would be little affected.

"I think we're well positioned here, but if you haven't got good, big competitors and good start-ups, you're in the wrong market," Cisco Chief Executive John Chambers told analysts after the company reported quarterly earnings this week.

The market for high-end offerings, such as telepresence rooms costing about $300,000 each, will grow 19 percent annually through 2015, according to research firm Ovum.


Many smaller companies in the industry said Microsoft's massive bet on Skype would boost take-up of videoconferencing and create new opportunities for them.

"Skype takes the scariness out of videoconferencing," said Ashish Gupta, marketing chief at venture-backed Vidyo, whose software platform is used by HP and Google (GOOG.O) among others.

"It makes videoconferencing really obvious and part of everybody's life. As people use videoconferencing at home they are going to ask for it in the enterprises," Gupta said.

Polycom Vice President Sue Hayden said Skype was a consumer offering that should not affect the enterprise market.

"We don't see the Skype consumer play disrupting the enterprise performance," she said, adding the acquisition would not have an impact on Polycom's business with Microsoft.

"We have a number of contractual arrangements with Microsoft that are fully in place, fully intact. This does not change that at all," Hayden said.

Analysts at William Blair & Co -- which estimates Polycom derives some 5 percent of its revenue from Microsoft -- said the deal would not affect Polycom in the near future but there were longer term risks.

"It could cap Polycom's growth potential within the Microsoft ecosystem, especially as Skype scales up to serve the enterprise market (though this will not happen overnight) and hardware devices are viewed as less important," analysts said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Microsoft to buy Skype in $8.5 bln deal [ID:nN10298656] Microsoft seen overpaying for Skype [ID:nN10301524] Investors slam Microsoft's Skype deal [ID:nN1095174] TAKE A LOOK-Microsoft to buy Skype [ID:nN1099356] Huawei, ZTE to shake up video conferencing-Ovum [ID:nLDE7442BK] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Sayantani Ghosh in Bangalore; Editing by Steve Orlofsky)

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Comments (2)
AaronP wrote:
Certainly an interesting time ahead for the video conferencing industry. Maybe we’ll even see a credible home telepresence offering at last, considering that MS has 25 million Xbox Live subscribers they could push the service out to.

五月 13, 2011 6:52am EDT  --  Report as abuse
talktalk wrote:
Room systems are not to be found in homes likely used by Skype users, so Ms. Hayden is correct. And, video is not made any less “scarry” with Skype as “if you are boring face-to-face, you will be still boring via video” and there is far too much boring video on Skype, YouTube, TV and any other video. In fact, they all need to learn about video “content product and presentation skills” rather than just more of it. Having written the first book on Teleconferencing in 1985 (send me yours if you have an earlier one), Teleconferencing was more significant in the late 1970s with ATT’s PMS-Picture Phone Meeting Service than it is today, IMHO. Few really care about why isn’t working just wanting to sell more hardware. I do know why though.

五月 13, 2011 9:10am EDT  --  Report as abuse
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