Cisco challenges Microsoft with WebEx takeover

In a bid to counter Microsoft Corp.'s expansion in the market, Cisco Systems Inc. agreed to buy WebEx Communications Inc., the largest provider of Internet teleconferencing services.

The acquisition deal is expected to be worth $3.2 billion. WebEx investors will receive $57 a share in cash. The offer is 23 percent higher than the company's closing share price of $46.20 yesterday.

Cisco Systems and Microsoft are vying for corporate customers who want to simulate face-to-face meetings, a business that may more than double by 2011. This is the largest purchase by Cisco since the acquisition of Scientific-Atlanta Inc. last year. It gives the company an increased access to a market that is growing faster than its traditional business for switches and routers.

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

Cisco Systems Inc. is the worldwide leader in networking for the Internet. Cisco was founded in 1984 by a small group of computer scientists from Stanford University. Since the company's inception, Cisco engineers have been leaders in the development of Internet Protocol (IP)-based networking technologies.

WebEx was founded in 1996 by Subrah Iyar and Min Zhu. The company provides on-demand collaboration, online meeting, web conferencing and video conferencing application. Its products include "Meeting Center", "Training Center", "Event Center", "Support Center", "Sales Center" "MeetMeNow", "PCNow", "WebEx AIM Pro Business Edition" "WebEx WebOffice".

WebEx has a 65 percent share of the market for Web-based meeting services and Microsoft is its biggest competitor. The latter will now start testing Internet-calling features for its Office software this month. It had earlier acquired PlaceWare Inc. in 2003, gaining programs that allow people to work together over the Internet.

Cisco System still comes as a distant second as Microsoft is ahead of Cisco in key areas. In all probability, Microsoft will now be on the hunt for takeover targets thus increasing the gap between the two rivals.