Log In

Reset Password
BERMUDA | RSS PODCAST

Cisco to buy WebEx for $3.2b

SAN FRANCISCO (AP) — Cisco Systems has agreed to acquire the online meeting company WebEx Communications for about $3.2 billion in cash, a takeover that furthers Cisco’s push beyond its core market for networking gear and into the lucrative arena of business communications.Cisco Systems Inc., the leading maker of routers and switches that direct data over computer networks, said yesterday it will pay $57 per share of WebEx Inc. That represents a 23 percent premium over WebEx’s closing price of $46.20 Wednesday on the Nasdaq Stock Market.

Shares of WebEx soared $10.30, or more than 22 percent, to $56.50 in afternoon trading on the Nasdaq Stock Market. Cisco shares gained 3 cents to $25.88 on the same exchange.

The acquisition has been approved by both boards and is expected to close in the fourth quarter of fiscal 2007, Cisco said. Cisco said it expects the transaction to have a neutral effect on its fiscal year 2008 earnings after one-time charges are subtracted. The total purchase price will be about $2.9 billion when factoring in WebEx’s $300 million in cash on hand.

San Jose-based Cisco has recently made a number of acquisitions branching out from its core business of supplying networking gear, namely in communications, social networking and other areas that help drive traffic over the network and increase demand for its core equipment.

The acquisition was Cisco’s 119th since 1993 and follows several other major recent takeovers by the company. Cisco is in prime position to shop around, as a surge in demand from service providers snapping up sophisticated new networking gear has left the company sitting on a mountain of cash. Cisco is Silicon Valley’s most richly valued company with a current market capitalisation of about $156 billion. Cisco finished the second quarter of the current fiscal year with nearly $21 billion in cash.

In February of last year, Cisco completed its $7.1 billion acquisition of Scientific-Atlanta Inc., the No. 2 seller of cable television boxes after Motorola Inc. The takeover was designed to bolster Cisco’s ability to deliver content directly to consumers’ homes. Cisco also said in January that it was paying $830 million in cash and stock to acquire privately held IronPort Systems Inc., a maker of anti-spam and antivirus security products.

The company has since made several smaller acquisitions in the social networking and communications arenas, with company executives saying that more deals in those areas are in the works.

Santa Clara-based WebEx makes applications that enable online conferences and secure instant messaging. The company says it commands 64 percent of the online meeting market, with more than 3.5 million people using WebEx services every month for online communications.

Cisco said the acquisition will allow it to tap into the increasingly lucrative market for business communications over the Internet.

“As collaboration in the workplace becomes increasingly important, companies are looking for rich communications tools to help them work more effectively and efficiently,” Charles Giancarlo, Cisco’s chief development officer, said in a statement. “The combination of Cisco and WebEx will deliver compelling solutions accelerating this next wave of business communications.”

Some analysts expressed concern on a conference call about the price of the deal, considering WebEx had just $380 million in revenue last year and just under $49 million in net income.