Cisco to Microsoft: Put Up Your Dukes

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Analysis: Cisco Systems’ $3.2 billion bid for
WebEx is another gauntlet thrown at the feet of Microsoft, which analysts
say has been moving in on Cisco’s communications turf.

WebEx (Quote) is the leading purveyor of Web conferencing, allowing users to conduct real-time meetings over the Internet. WebEx also
offers, thanks to its purchase of Intranets.com, software that lets corporate employees share Web-based documents and workspaces.

Cisco (Quote) Chief Development Officer Charles H. Giancarlo said WebEx will help Cisco expand the purview of its unified communications division.

This portfolio already includes applications for video conferencing, voice and Web conferencing and voicemail; with WebEx, Cisco will add hosted, subscription-based Web conferencing services for small- and medium-sized businesses (SMB).

What makes the WebEx bid so intriguing is that Microsoft (Quote) also shares Cisco’s belief in the importance of online collaboration, and has made several aggressive moves in its own bid for unified communications domination.

Such was the key takeaway of the deal for some analysts who cover the space.

“This was really Cisco’s Google move,” said Gartner analyst David Willis. “WebEx has the brand. They are the Kleenex of the Web conferencing space.”

“This counters some very aggressive moves by Microsoft lately. [Microsoft] has been talking about voice calling from Office Communication Server, and having 100 million people use that. They’ve been aggressively marketing against Cisco, claiming that their voice quality is better.”

Microsoft’s response to the buy was curiously non-confrontational. But it did highlight the differences between the two giants’ philosophies.

While Cisco claims the “network is the platform,” Microsoft believes software is the right platform for all forms of communications and collaboration, according to Kim Akers, Microsoft’s general manager of unified communications marketing.

“When we speak with customers they frequently tell us two things: First, they prefer the economics of a high volume low cost software approach; and second, they get more value when their communications technologies work with the applications and networks they use today,” Akers wrote in a statement e-mailed to internetnews.com.

Yankee Group analyst Zeus Kerravala said the deal is an important one for Cisco because it answers Microsoft’s successful LiveMeeting collaboration software, which the software giant grabbed when it bought Placeware in 2003.

Interestingly, the deal comes a day after Microsoft announced its intent to purchase voice recognition technology leader Tellme. Tellme will provide Microsoft a solid voice infrastructure with which to pad its unified communications strategy and further vie with Cisco.

Willis said the Tellme deal may have forced Cisco to feel like it had to pull the trigger on WebEx, for which it paid a hefty 23 percent premium.

“If they wanted it cheaper, they could have bought it a month ago,” Willis said.

Kerravala said the premium is a pittance compared to the dividends WebEx will likely pay Cisco in the long run.

IBM (Quote) is a player in the unified communications front, too, but Willis said IBM will be more of an ally than a competitor to Cisco as the two seek to gang up on Microsoft.

Regardless of the changes and challenges that come with any large corporate integration, the good news for WebEx customers is that Cisco isn’t messing with the crown jewel.

Giancarlo, on a conference call to discuss the deal, said Cisco will continue the WebEx subscription model because it lets SMBs use the collaboration tools of large enterprises without the management requirements and infrastructure investments that were previously barriers.

Collaborative technologies are growing in sophistication and use because people want to interact with each other regardless of physical proximity. WebEx claims to own 35 percent of the overall Web collaboration market.

As the market leader for such technologies, WebEx shares Cisco’s unified communications vision, Giancarlo added.

This article was first published on InternetNews.com. To read the full article, click here.