Cisco and IBM : a big one night stand ?

Wow what a week for UC … Cisco and WebEx today announced a definitive agreement for Cisco to acquire WebEx. :

…. WebEx is a market leader in on-demand collaboration applications, and its network-based solution for delivering business-to-business collaboration extends Cisco’s vision for Unified Communications, particularly within the Small to Medium Business (SMB) segment.

Under the terms of the agreement, Cisco will commence a cash tender offer to purchase all of the outstanding shares of WebEx for $57 per share and will assume outstanding share-based awards, for an aggregate purchase price of approximately $3.2 billion, or approximately $2.9 billion net of WebEx’s existing cash balance. The transaction will be accounted for in accordance with generally accepted accounting principles, and the acquisition of WebEx is expected to close in the fourth quarter of Cisco’s fiscal year 2007. Cisco anticipates this transaction will be neutral to its non-GAAP FY2008 earnings.

The acquisition has been approved by the board of directors of each company and is subject to various standard closing conditions, including approval under Hart Scott Rodino and similar laws outside the U.S.

"As collaboration in the workplace becomes increasingly important, companies are looking for rich communications tools to help them work more effectively and efficiently," said Charles H. Giancarlo, Chief Development Officer at Cisco. "The combination of Cisco and WebEx will deliver compelling solutions accelerating this next wave of business communications.

Cisco believes the network is a platform for all forms of communications and collaboration, and WebEx’s technology and services portfolio complement Cisco’s leadership in the Unified Communications and collaboration market, while providing Cisco with a new and unique business model to expand its presence in the fast-growing SMB market," Giancarlo continued. …

For sure this has big impact on the UC market players. Microsoft already has a complex relationship with Cisco because of its UC strategy and this certainly hurts. WebEx is after all a or the major player in webconferencing and a big competitor to Microsoft in the webconferencing space. But also to IBM … IBM is not at all a strong player in the web based webconferencing, but they do have ambitions in this space.

This whole development must not be an ideal situation IBM. I am sure the IBM people already must have known something when they announced their partnership with Cisco at little over a week ago at VoiceCon. Amongst other integrations they are (were ?) to :

… Cisco Unified MeetingPlace and Lotus Sametime and Lotus Notes integration will enable Lotus Sametime Web conference integration with and control of Cisco Unified MeetingPlace audio and video conferences, and click-to-conference capabilities from Lotus Sametime and Lotus Notes. …

Yeah sure this is still going to happen right ? I don’t think so.

From my perspective IBM is not making good decisions with regards to their partnerships. Cisco is (going to be) a strong competitor in the UC space also to IBM.

IBM, Cisco has found somebody new and given the fact that the IBM / Cisco partnership has not been able to show any thing but a press release, this could be viewed as a one night stand …

Some of the analysts (not quoting Radicati today …) give similar indications :

Mike Gotta, Burton Group :

Time to pause and reflect… but this is quite a bold move by Cisco. Right now my thinking is:

  • The deal puts Cisco aggressively "in-the-face" of Microsoft (taking on Microsoft Office Live Meeting and its emerging Office Live effort)
  • The move throws a wrench into the IBM partnership. No wonder the VoiceCon announcement of the IBM alliance during the Cisco keynote was somewhat passive

    and :

  • The deal puts an interesting twist on the recent IBM partnership. Cisco clearly wants to be in charge of its own destiny when it comes to unified communications. There will be the expected "things are fine – they really are" by management on both sides, but this clearly complicates things for customers and the sales force trying to argue one over the other. Cisco is not going to follow in IBM’s shadow in the UC2 arrangement. Cisco will play these cards shrewdly – the Lotus Expeditor client is a sound platform to target and the rest of the IBM deal remains attractive with much potential – Cisco is simply not dependent on that path in terms of being an IBM "add-on". (Note: Clearly, this was part of the reason the agreement was downplayed last week at VoiceCon during the Cisco keynote.)
  • Overall though – Microsoft still has a more cohesive set of technologies rather than a mix of several vendors products across different on-premise and hosted models. Given Cisco’s lack of experience with applications, SaaS and so on – Microsoft has time to adjust and respond accordingly (MOLM 2007, OCS 2007, etc). Cisco now has assets and has placed its ante into the broader UC game. But right now, it’s just the ante — we need to see execution over the next year to see if Cisco can adjust to all of these various moves.

Gartner Group : Cisco Charges Into ‘Software as a Service’ With WebEx Buy

The acquisition of WebEx also portends tough competition with Microsoft, whose voice initiatives have been moving into Cisco’s core market areas. The acquisition may also complicate relations between Cisco and IBM: Cisco recently said it would resell IBM’s SameTime Web-conferencing product — which is competitive to WebEx — and it agreed to work jointly with IBM in developing an Eclipse-based unified-communications client, which would compete with a similar effort WebEx had under way.

Let’s see how it goes. Adam Gartenberg and Ed Brill from IBM have been very quiet up’ till now, but this could be due to travel or it’s just no big news to IBM that could also be the case.

Update 19-3-2007 :

I also came across an analysis by Nemertes on the Cisco / WebEx deal and it’s impact on Microsoft and IBM … some strange conclusions I might add :

… Finally, Cisco can now more effectively compete with Microsoft in the overall unified communications and collaboration market. Cisco can exploit WebEx WebOffice to compete directly with Microsoft SharePoint and directly challenge LiveMeeting with its own hosted service. …

Ok Cisco will most certainly compete with Microsoft on the UC strategy and … also with SharePoint through their WebOffice offering …

… In addition, last week Cisco announced plans to integrate MeetingPlace with IBM Lotus (NYSE: IBM) Sametime Web Conferencing. It is likely that Cisco will integrate WebEx with Sametime as well. …

So Cisco won’t compete with IBM on offerings such as Quickplace / Quikr but will compete with Microsoft on SharePoint ?? Furthermore integrate WebEx with SameTime ?? Does IBM really want to give up on their webconfering plans ??

I can’t wait until the formal statements from IBM and Cisco on this …

Update 27-3-2007 :

Adam Gartenberg (IBM) shares his analysis :

An ever-changing market… changes again

By now I’m guessing everyone’s heard about Cisco’s acquisition of WebEx, and have also read the many reports and analyst views on it.   
I’m not really in a place where I can comment on any kind of official position IBM might have related to the news, and at the same time sit in a role that doesn’t really make it possible to publicly discuss an unofficial position.  So, I’ll just leave things for now by saying that in the 5+ years I’ve been involved in the real-time collaboration market, the only thing I’ve learned for sure is that today things are different than they were yesterday, and tomorrow will bring more of the same.

I guess that’s that then … The shortest partnership I’ve seen so far in UC …