Is Cisco Losing Its Buyout Mojo?

In a rare move, a Cisco target rejects its offer

By Scott Budman
|  Thursday, Oct 15, 2009  |  Updated 3:12 PM PDT
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Cisco Makes Big Expansion in Video Conference Technology with Tandberg Purchase

money.cnn.com

Cisco is a buyout machine. Are the gears coming off?

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Cisco Makes Big Expansion in Video Conference Technology with Tandberg Purchase

Ken Wirt, Vice President of Consumer Marketing at Cisco, on teleconferencing.
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Most economists will tell you one of the signs that our economy is getting stronger is that companies are buying other companies. Cisco's $3 billion offer for Tandberg is a sign of the times, right?

Wrong. The Norwegian teleconferencing company has nixed Cisco's offer, saying it either wants more money or will stay independent.

Cisco has been a consistent bellwether for acquisitions, spending money to get its hands on new products, technology, and employees. Its acquisition machine slowed down during the bust, and its return shows a lack of fear and an abundance of confidence that things are going to get better, and that it's time to grow the business again.

Then again, perhaps Tandberg's defiance shows some fearlessness and confidence of its own.

What's notable about this hitch in Cisco's plans is that the company is the undisputed heavyweight champion of the tech buyout game.  Under CEO John Chambers, Cisco has shopped all over the world, first growing its networking and router business, more recently growing its consumer product division. 

When Cisco makes a deal, the deal goes down.  You almost never hear about shareholder dissent, legal investigations, or European antitrust holdups.  As a well-known Silicon Valley VC once told me, "When Cisco makes a deal, everyone involved knows who's boss. It just works out better than way."

Well, someone apparently didn't send the memo to Norway. Tandberg shareholders there owning nearly a quarter of the company have rejected the deal.

Now, there are several ways to look at this.  One, Tandberg is in the videoconferencing space, which is hot these days.  They could, with some legitimacy, say that Cisco's offer could be the first of several, thinking that maybe Cisco itself will come back with more money. Or maybe, now that it's in play, Tandberg could get an offer from another tech giant like Hewlett-Packard.   

On the other hand, $3 billion on the table represents a large premium not only to Tandberg's market value before the offer, but to the entire videoconferencing market.  Cisco is showing a lot of confidence in its growth, but really, without Cisco's killer sales force, does Tandberg have a chance to grow that quickly? 

I'm not suggesting that Tandberg shareholders unload their shares while there are extra kroner on the table.  But beware of hubris.  Cisco may increase its offer.  The spurned occasionally get over it and reopen their wallets. But sometimes, they don't come back.

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