12/8/2009 -- Cisco Systems Inc.'s $3.4 billion takeover bid for video-conferencing specialist Tandberg looks to be a go.

Cisco kicked off its Tandberg bid months ago, ponying up $3 billion as part of a public cash offer to purchase at least 90 percent of Tandberg's outstanding shares.

Cisco's effort took a bit longer -- and cost about 13 percent more -- than it expected, however. The deal even seemed to shift to the back burner for a while, until just last week, when Cisco announced that it had acquired more than 89 percent of Tandberg's outstanding shares, prompting Cisco to waive its self-imposed 90 percent condition.

Then, late last week, Cisco reported that it controlled more than 90 percent of Tandberg's shares, effectively making the acquisition a done deal -- at least from the perspectives of Cisco's and Tandberg's shareholders. Regulators aren't so sanguine, however; Cisco last week disclosed that it had received a second request for information from the U.S. Department of Justice.

Tandberg is one of several confusingly branded offshoots of the former Tandberg Radiofabrikk, a Norwegian company founded in the early 1930s. From the 1950s to the 1980s, Tandberg, which now styled itself Tandberg Audio Products A/S, produced high-end audio separates. By the 1990s, however, several Tandberg-branded offshoots -- notably in the data and storage segments, in addition to video-conferencing -- had also come to the fore. (Tandberg's audio gear, the golden age of which predates the digital revolution of the early 1980s, still enjoys an enviable reputation among collectors.)

Cisco and Tandberg collaborated on at least one prior occasion: In 2005, the networking giant launched a co-branded Cisco-Tandberg desktop videophone, the Cisco 7985G.

Industry watchers see the acquisition as a potential coup for Cisco.

"[T]his deal emphasizes the value of video to a comprehensive unified communications (UC) portfolio, but it also reflects the importance of infrastructure pull-through of video in the enterprise," wrote Gartner analysts Robert Mason, David Smith and Scott Morrison in an October research blast. "Opportunities in the videoconferencing market...are available mostly for high-quality video, including telepresence, and for solutions that extend video capability to the desktop. Execution in the telepresence arena has been critical for vendors seeking to gain executive sponsorship, and the market considers the desktop the only vehicle that could realistically drive enterprise video to critical mass.

"Despite strong customer interest in both telepresence and desktop solutions, enterprise video strategies still require vendors to address the shared-room environment, which in a global enterprise can consist of hundreds of room systems. Customers demand interoperability within this installed base as a hedge against whether high-quality rooms or improved desktop solutions will carry the day."

Tandberg gives Cisco, which Gartner researchers say already enjoys some degree of telepresence mindshare among customers, an interoperability capability for legacy video.

"Cisco solutions relied on Radvision's gateway technology to transcode calls between environments. Cisco has also met some resistance from audio/visual decision-makers within enterprises who have established preferences for Polycom and Tandberg, both industry stalwarts in the room system market," the Gartner trio noted.

The acquisition of Tandberg helps Cisco "accelerate its push into high-quality video over best-effort networks," Gartner noted. In addition, Tandberg should help shore up Cisco's position in the video microcontroller unit (MCU) and management software segment; this market enables users to "create multipoint conferences and serve[s] as the 'glue' between UC video, traditional videoconferencing and telepresence," Gartner concluded. --Stephen Swoyer