Cisco Buys WebEx for $3.2 Billion

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1. Frank Cefalu
   

   March 15th, 2007 at 7:04 am

   Yea But webex has contracts with companys like AOL with their new Business Messenger.

   And Dont forget the big guys use it like MYSql, Zend, Etc.

2. Martin Edic
   

   March 15th, 2007 at 7:05 am

   The bigger question is: Why is Cisco buying a web services company? They’ve been making some interesting acquisitions lately that seem pretty far left of their core business but until this one they’ve been small. The numbers on this one make it a whole different story.
   Looking forward to hearing the speculation…

3. Brian Abston
   

   March 15th, 2007 at 7:09 am

   What are some cheaper and more flexible startups that you are referring to? We are looking for a service like this and we are a smaller company that can’t pay that monthly fee. We need something cheaper than that.

   Thanks

4. datter
   

   March 15th, 2007 at 7:15 am

   I second the call for a list of alternative startups please.

5. Michael Arrington
   

   March 15th, 2007 at 7:15 am

   yeah, its right there. Just read past the headline.

6. Rishi
   

   March 15th, 2007 at 7:23 am

   Am I missing something. Cisco bought WebEx for 3.2 billion dollars when WebEx produced only 50 million dollars in profit last year?!
   Myspace produces 25 million dollars per Month and it was acquired for 580 million dollars.
   Unless WebEx plans to come up with something truly revolutionary thats a rip off by a long run.

7. Morgan
   

   March 15th, 2007 at 7:24 am

   That really seems expensive with those numbers, especially in an area that could change so much in 10 years.

   I’m certainly no valuation expert, but more than 60x the profit and more than 8x the revenue…

   No wonder I’m broke, you can’t create value if you don’t even understand it. Shoot.

8. Maleksh Da3wa
   

   March 15th, 2007 at 7:26 am

   3.2 Billion is Just a huge sum … on the other hand why don’t they just buy one or two promising startups and go with them, merge them together and achieve synergy?

9. RyanBarrett
   

   March 15th, 2007 at 7:29 am

   I just hope that this acquisition improves the WebEx service. It’s completely disfunctional on any Mac platform. Get with the times, WebEx, Macs are in.

10. Sean Ness
    

    March 15th, 2007 at 7:34 am

    Cisco is buying a channel for its TelePresence system - http://www.cisco.com/en/US/net.....home.html.

    It is all about hardware and displays. Those startups can’t (yet) compete there.

11. Michael Arrington
    

    March 15th, 2007 at 7:35 am

    meh - I have hardware, and a display. I’m sitting in front of it now.

12. Sean Ness
    

    March 15th, 2007 at 7:50 am

    Sorry…it’s all about Cisco harware and their HD TelePresence displays. Once you’ve used their TelePresence system you’ll understand. It is like using broadband for the first time…once you’ve tasted speed, you don’t want to go back to dial-up.

    We will soon all have HD displays in our living rooms. Cisco already owns a good chunk of the set-top market with their acquisition of Scientific-Atlanta. Throw a camera in that and voila…a home-based TelePresence system (a few years away yes…as the home broadband speeds are not yet up to snuff).

    The WebEx acquisition simply gives Cisco more sales inroads into companies that desire a better experience.

13. Raj
    

    March 15th, 2007 at 7:56 am

    Cisco is just doing what EMC started a few years ago — they’re diversifying from low-margin hardware into higher margin software and services. The writing is on the wall and dragging hardware into a software sale isn’t a bad strategy for Cisco.

    There’s still not a great alternative to WebEx. I have high hopes for DimDim, but it’s not ready unless you have time to tinker and I’m not ready to place a big bet on alpha software when a presentation is at stake. I love what they’re doing though and will certainly be a user when the DimDim product matures, but it’s just not ready for primetime yet.

    In short — LiveMeeting doesn’t compare to WebEx at all in my opinion. It’s clunky and doesn’t appear to work well with FireFox. Ruled out instantly. Same story with GoToMeeting.

14. Keith Teare
    

    March 15th, 2007 at 8:05 am

    Try Adobe Connect (former Breeze). Its cross platform and rocks.

    32c a minute for occasional use. No contract required.

    We use it a lot at edgeio.

    Keith Teare
    edgeio

15. BlogReader
    

    March 15th, 2007 at 8:06 am

    Adobe’s “Live Connect” (or whatever it is called today) is pretty cool. Built into Acrobat 8 you can easily start a meeting. I think you pay Adobe per minute used or setup a monthly plan.

16. Ryan
    

    March 15th, 2007 at 8:24 am

    In response to Brian Abston and datter’s comments 3 and 4 above…

    iGrOOps is a brand new start-up that *may* offer the functionality you need, at significantly lower cost. Go to http://www.igroops.com and click on “Define Your iGrOOp” to see a list of available applications. iGrOOps is looking at integrating an “application sharing” tool in the future.

17. rack pallet
    

    March 15th, 2007 at 8:35 am

    wow yeah 50mm vs 2.9billion ….

    50mm @ 60 Years = 3.0 Billion ….

    - Um where is the logic? do we operate on logic any more? anywhere?

    -Rbowles

18. MistOne
    

    March 15th, 2007 at 8:38 am

    Also in response to Brian # 3:

    I have used ReadyTalk and it is very nice, great interface, service, and simple tools.

    Concerning the acquisition as a whole, WOW, $3.2 billion is a lot of money. Cisco is a giant, and WebEx is the king is this space, to me, this buy is all about the enterprise market, and an additional integration point for their hardware and services into the IT grid of mega-co’s.

19. Ron Palmeri
    

    March 15th, 2007 at 8:38 am

    Keith Teare is right about Breeze (now unforunately named “Adobe® Acrobat® Connect™ Professional software”). it rocks.

    the only problem is their marketing sucks, but its a much better product than Webex and uses Flash, so it runs everywhere. the ondemand pay per use model is great for occational usage.

20. Nag
    

    March 15th, 2007 at 8:51 am

    There is one opensource company.. I think i read this on TC sometime back :

    http://1videoconference.com/

    Haven’t tried but it is free

21. Nick
    

    March 15th, 2007 at 8:54 am

    Why is it that the most annoying products make so much money? Has anyone used Success Factors software or SAP - wow that’s bad - now $3.2 billion for WebEx - unreal.

    Try GoToWebinar or GoToMeeting - 2 awesome products that are much cheaper and easier to use.

    https://www.gotowebinar.com/
    https://www.gotomeeting.com/

22. Natasha
    

    March 15th, 2007 at 8:55 am

    At the first sight, the evaluation of 23 x EBITDA ($124mil) and 60 x Net Income ($48.6 mil) is mind blowing, yet if you look at:

    (1) Webex customer base
    Webex has “23,800 customers (do not know if this means individuals or companies as well),
    including such heavy users as Boeing (BA), Johnson & Johnson (JNJ) and Salesforce.com (CRM)”
    (per http://online.barrons.com/arti.....DAxWj.html)
    Cisco potentially acquired all of them at $121/customer — that does not look that expensive

    (2) Cisco’s Cash Reserves
    Cisco has $20.1 Bil in Cash with $10.3 Bil in EBITDA in 2006. They are facing a challenge either to buy back their own shares or to invest in growth.

    (3) Webex growth rate and brand recognition (vs. other startups in the same market)
    Webex has been growing at 15-20% in revenue with 15% of that as Net Income

    Yes, there is a number of start-ups with less costly solutions, yet they have not “crossed the chasm” yet, while WebEx has done a decent job of engraving their blue/green image in people’s minds when it comes to on-line collaboration. (I, as well, kept seeing their banners and receiving their fliers)

    (4) Cisco’s Telepresence and their need to continue acquiring new customers there

    With all of that taken into account and, am sure, with something else that general public does not have open access to — this acquisition does not appear to be in the “bubble bursting” range as much as it may appear at the first sight.

23. Michael Arrington
    

    March 15th, 2007 at 8:57 am

    Nag - thanks, I had forgotten 1videoconference. I added them to the post. DimDim is also open source.

24. Mike Gotta
    

    March 15th, 2007 at 9:21 am

    There are a couple of facets to the deal to consider.

    1. WebEx Connect and WebOffice had diversified WebEx from being so reliant on a commoditized web conferencing market. The hosted web conferencing market is very crowded, over 80 players, all facing downward pricing pressures. But the deal gives Cisco an option to sell hosted web conferencing into the SBM space (although as Natasha points out, there are large customers).

    2. WebOffice provides Cisco with a credible SaaS collaboration platform for the SMB market as well. The social networking technologies that it recently acquired could also be used to hellp build out that type of functionality around WebEx Connect.

    3. The deal is a chess move vs. Microsoft re: Live Meeting.

    4. 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.

    5. The WebEx Media Tone Network has always been the crown jewel for WebEx, not web conferencing. That distributed P2P network architecture and technology underpinning now belong to Cisco to further advance.

25. Alan
    

    March 15th, 2007 at 9:29 am

    I think Natasha’s comment is very much on-point. I personally think this is a ridiculous amount of money and that the investment will never pay off but that they’re buying customers here more than anything.

    Software wise the investment is foolish. The service pretty much sucks and building something better doesn’t require doing it using the existing Webex service in any way.

    Brand wise, the Webex name is gold. We use Adobe Connect at my company but when people need to setup a web meeting they say “hey, let’s setup a webex”. It’s just that simple, they own the market with their name.

    Future sales opportunity: With that many customers and that many fortune 500 customers of course, they’re paying a HUGE premium for access into these channels. They just better come up with a good solution to sell before the smaller guys creep their way into these Fortune 500 clients looking for better/cheaper software. I think the window of opportunity here with these large clients is short term.

    Michael - This story makes me think that Techcrunch should have some sort of Good Deal vs. Bad Deal voting tool. Basically as new deals are announced people can vote on whether they think it’ll pay off or not. You and the rest of the Techcrunch team would of course chime in with the final verdict several months later using whatever criteria makes sense. It would just be kinda cool to let people vote on whether they think a company/deal has potential or not using a simple yes/no voting mechanism. Kind of like a game show right on the site. I know I have a hard time keeping track of all the stories that come through the site. Hey, if nothing else you’d get a lot more page views out of it.

    Anyway, my vote on this deal would be “NO”

26. Al
    

    March 15th, 2007 at 9:32 am

    I would imagine that Cisco believes that WEBEX can grow it’s user base and also convert a large portion of it to the Connect platform that they have been building and pushing to developers. Also compare those numbers with Salesforce, if they can convert them to the connect platform then they can significantly increase their revenue/margin. Also they claim to have more than 2 million users if you listen to their connect audio -> http://www.webex.com/partners/webex-connect.html.

    It’s still seems expensive and risky for CISCO to me, but then I don’t have $20B in the bank!!

27. Lukas Bergstrom
    

    March 15th, 2007 at 9:34 am

    For those asking about alternative startups, let me recommend the company I work for, IVT. We recently launched a simple, small footprint service for individuals to create and distribute webcasts that can be synced to slide loops (ppt or Flash.) The product (IVT Studio) has a few other features, but we tried to keep it focused on the core use case, and as simple as possible.

    IVT is not a new company; companies using our enterprise solution include IBM and NEC. But Studio allows people to webcast without a large-scale corporate deployment decision. If you’re curious, I recommend just downloading it and trying it out, you’ll be finished with your first webcast in a couple minutes.

    http://www.ivtstudio.com

28. Punit
    

    March 15th, 2007 at 9:36 am

    Are we forgetting CitrixOnline completely?? Its parent company (Citrix) is pretty well known… They have cool products and I know bout it from a friend who works there..check GoToMyPC, GoToAssist and two more that i cant remember…their marketing directly hits on webex..and i think it works…check this out…

    http://www.citrixonline.com/s/071106/ka/wx1/friend

    https://www.gotomeeting.com/s/071106/ka/wx1/friend

29. Paul Bissett
    

    March 15th, 2007 at 9:36 am

    What do you think the impact of commodity computing cycles (a la Amazon Web Services like EC2/S3) will have on the ability of the new companies to compete in this arena?

30. John Earnhardt
    

    March 15th, 2007 at 9:48 am

    For a little more flavor on WebEx acquistion, you can read Charlie Giancarlo’s blog entry of today. He is Cisco’s Chief Development Officer and President of Linksys. He states, in part, “We feel strongly that network-based collaboration is a large part of our future and believe that WebEx is an excellent platform to build on.” Full post here: http://blogs.cisco.com/news/20.....ffice.html

31. Eric B
    

    March 15th, 2007 at 9:53 am

    I’m surprised that no one has brought up Cisco’s acquisition of Five Across. Business Social Networking sites + Online Meetings/Collaboration seems to be a fairly good concept.

    Of course, I’m not sure if it’s worth $3.2 billion… but who knows?

32. StartUpCrunch
    

    March 15th, 2007 at 9:59 am

    I wonder sometimes if these figures are true. Myspace and there 560 Million yea, anyone who knows marketing knows full well that outrageous sums gets the working classes chattering. If you want to get editorial coverage make it known that you have just made billions.

    True or not it matters not.
    Classic examples were youtubes expected profit of 12 million per month which later turns out to be 12 million per year (Not even covering their hosting costs). Myspace and their 100 million users turned out later to be more like 10 million real users.

    As to if I believe these monstrous figures of course not, and anyone who’s been on the other side of the table would be a little more sceptically. A little bit of investigation and a little more savvy would ruin a lot of the fun these board room boys are having at your expense.

33. Doug Mehus
    

    March 15th, 2007 at 10:04 am

    It’s also worth noting that WebEx bought, either last year or the year before, Intranets.com, which was really the first online document editing and sharing service around. It essentially spawned wikis. So, that’s pretty cool. I see a bit of a strange trend emerging: Cisco is buying the technology of early web 2.0 pioneers who haven’t really innovated (Tribe, Five Across, WebEx, etc.) since their initial launch years ago. Perhaps Cisco’s new motto could be, “Cisco - the human network - We evangelize Web 2.0 by buying Web 1.0 assets that started it all.”

    Cheers,
    Doug

34. Matt Mendolera
    

    March 15th, 2007 at 10:18 am

    I also work with Lukas (above) and IVT, so this topic is definitely of interest as Cisco is a partner of ours–the company has been making some very interesting plays in the past 6-12 months, and I particularly think that the way they’re increasing the profile of some of these new endeavors is brilliant. What was the TV show that featured Cisco’s telepresence? It was product placement at its finest–and this move with WebEx is another great idea. It seems as if Cisco is driving hard to market their brand as much closer to the average business user than ever before–WebEx is a perfect platform for that.

    Of course, as Lukas pointed out, IVT’s new product is also aiming for that goal. Today’s workforce is increasingly interested in trying new gadgets and tools…and it’s pretty evident that the collaborative and video-friendly applications are on every business’ radar right now.

35. Robert Dewey
    

    March 15th, 2007 at 10:55 am

    Wow, what a price tag! Cisco certainly is acting strange… Lets hope their hardware doesn’t follow suit.

36. Jay
    

    March 15th, 2007 at 11:23 am

    On a side note, I heard IBM was also in the running to buy WebEx.

37. Bilo
    

    March 15th, 2007 at 1:35 pm

    webex has much retard

38. anthropocentric
    

    March 15th, 2007 at 2:02 pm

    You should definately add GotoMeeting to your post. They are a major competitor and far more relevant than the other companies you listed, IMHO.

39. bdeseattle
    

    March 15th, 2007 at 2:19 pm

    @12 - You got it right. Think of where cisco is going with telepresence… They recently started a new tv marketing campaign around this - the Human-powered network. Think telepresence plus HD plus hosted conferencing services (a la the webex model). Perhaps they bought webex for their market penetration in anticipation of their wider telepresence and related initiatives. I personally use it every single day in my job in the enterprise software biz.

40. Alejandro
    

    March 15th, 2007 at 2:33 pm

    This acquisitions is much more than the cover reads:

    ***they are acquiring a company that is in the process of developing a AppExchange (Salesforce) type platform. Where developers can create applications into the Cisco ecosystem***

    If I was Salesforce this acquisition would really make me wonder….. get my drift?

    As I’ve said before on demand vendors is where you’ll see major acquisition in ‘07. Just look at Microsoft’s acquisition of TellMe yesterday….

    Hosted, hosted, hosted applications

41. Amy Wilsch
    

    March 15th, 2007 at 2:54 pm

    Who knew. I’m going to start schmoozing my Cisco contacts

    I use both LiveMeeting and GoTo frequently and they all have issues.

42. Tim Smythe
    

    March 15th, 2007 at 3:50 pm

    ….and then there was raindance, placeware, interwise, wiredred

43. Mark
    

    March 15th, 2007 at 4:03 pm

    @4:
    I personally like Yugma ( http://www.yugma.com )

    After read http://www.voodooventures.com/.....ype-yugma/ I tried it and got hooked. Talk about easy and cross platform! And free.

44. Ferodynamics
    

    March 15th, 2007 at 4:31 pm

    Does this mean I’ll get to video chat my 500 Tribe friends at the same time in HD?

    I am Locutus of Tribe. Resistance is futile.

45. Zaib Kaleem
    

    March 15th, 2007 at 6:58 pm

    With Linksys and Sipura acquisitions Cisco hoped to slingshot into SMB market but it wasn’t as huge as expected. Webex allows Cisco to overcome hardware hurdle and make another push for SMB market.

    It is also defensive…Microsoft has a solid product with Live Communications Server. Coupled with fact that many SMBs are less network savvy and very comfortable with Microsoft products they would probably go with a MS solution before any hardware based Cisco solution for VoIP/telephony.

46. Milo
    

    March 15th, 2007 at 7:10 pm

    Mike — I don’t think their target market is for users like you who think its expensive and bulky.

    The price is peanuts for billion dollar companies.

47. karl
    

    March 15th, 2007 at 7:14 pm

    Wow. That’s about the dumbest thing I’ve heard in a while.

    http://www.cddvdripper.com

48. tijan
    

    March 15th, 2007 at 9:25 pm

    Mike, doodleboard (http://www.doodleboard.us) is another startup worth mentioning. Its an infinite ajax whiteboard that’s ultra simple to use. Still in alpha though…

49. Sachin
    

    March 15th, 2007 at 10:45 pm

    I would say Citrix Online’s http://www.gotomeeting and http://www.gotowebinar beats WebEx headsup. Citrix products are cool, easy and simple…and more over very cheap as compared to WebExs heafty charges.

    Look at this URLs for straight out comparison -

    http://www.citr…6/ka/wx1/friend

    https://www.got…6/ka/wx1/friend

50. Sarit
    

    March 16th, 2007 at 1:36 am

    I don’t get it.
    We used Webex at work for remote contorling and presentations (sometimes). It was so slowww and hard to understand. Not very intuitive.
    Logmein.com is far far better for out of the box remote controling, and there lots of new services for presentations out there.

51. Sean
    

    March 16th, 2007 at 3:25 am

    I agree with Sarit, ive used webex for work and it is rather slow and not very user friendly to be honest.

52. Elliot Yates
    

    March 16th, 2007 at 8:56 am

    It is a strange move from Cisco, why are they buying a web services company? I also agree with the pervious posts, that Webex really quite sucks.

53. Dean Collins
    

    March 16th, 2007 at 10:34 am

    Sounds like the old dot com buybble strategy of “Synergies” howe I have another theory as well google up Orative (or go to my blog and search on ‘Orative’) it will then make sense to you why this was worth this much oney to Cisco.

    Cheers,
    Dean Collins
    http://www.collins.net.pr/blog

54. Tamara
    

    March 16th, 2007 at 10:47 am

    Wow, another example of why being first (even if you’re really good) isn’t always best. I was the UI designer for NetPodium, which was a startup born in 1999. It rocked…had all the functionality of today’s solutions and some other good stuff they don’t even have yet (threaded chat, for example). Worked with all the streaming media solutions. If I do say so myself, the UI rocked. And, it was waaaaaay too early. We were bought by InterVu, which was a streaming media network solution, which was then bought by Akamai. We were the dolphin in the tuna net for that acquisition. And then, the bubble burst and Akamai, quite intelligently, pulled back to their core business, and Netpodium, sadly, was gone. Around the same time we were purchased, as I recall, the industry was all abuzz with how WebEx spent a HUGE chunk of investor money on hiring RuPaul to do some event or advertising or something on them. A little later, PlaceWare was purchased by Microsoft, and became part of LiveMeeting. A few days ago, I gave a preso using the Macromedia solution–and it was actually a great experience. Anyways, thought you all might like that little story. Congrats to WebEx.

55. David Mackey
    

    March 17th, 2007 at 4:34 pm

    Wow. I wouldn’t have ever seen that coming. I think its a good thing though, if Cisco plays it right (by lowering prices). WebEx is the industry standard, but there are a lot of options. Still, if a company wants to act “big” WebEx is the way to go. I’ve been using CrossLoop personally though (mainly b/c its free, quick, and easy).

56. Massimo Bizzarro
    

    March 17th, 2007 at 8:19 pm

    Helloworld has everything that Webex has and more and it is also alot cheaper to use broadcasting is only pennies per stream. video email online sharing, podcasting,blogging, and also a place to social network with online storage starting at 2 Gigs. E-mail me for more information.

57. Massimo Bizzarro
    

    March 17th, 2007 at 8:21 pm

    My page is http://www.hellworld.com/massimo

58. Massimo Bizzarro
    

    March 17th, 2007 at 8:22 pm

    Sorry http://www.helloworld.com/massimo

59. Andrew Inderwick
    

    March 18th, 2007 at 2:20 pm

    Try our web conferencing software and let us know your thoughts!

    Unlimited seats, unlimited conferencing for $59.99/month
    http://www.premierwebconferencing.com

    On our site you will find an extensive overview video that explains the features from both the moderator and participants view point.

    Feel free to take the features for a test drive in our public room.

    Andrew

60. Mystery Man
    

    March 22nd, 2007 at 8:13 am

    I like boobs

61. Kevin
    

    March 22nd, 2007 at 9:50 pm

    I’m curious about the math behind Natasha’s excellent comment on WebEx customer acquisition cost.

    Correct me if I’m wrong, but doesn’t $2.9B / 23,800 = $121,000 per customer?

    Or did you mean that it’s about $121 per user assuming that most customers have an average 1000 user license?

    Also, I think the more accurate stats on Webex customers is around 28,000 (The Barron’s article was published July 2006)

    http://www.webex.com/overview/customers_all.html