Polycom Snaps Up HP’s Video Conferencing Business

by Gaurav Kheterpal on June 3, 2011

HP is in the news again as the TouchPad launch date gets nearer. HP Execs believe the TouchPad will trounce the iPad and the company has already announced its plan to license webOS to other companies. In February, HP announced that it would be expanding its use of the webOS to include the next generation of its computers as well.

Therefore, it’s understandable that the world’s leading PC maker is now trying to get rid of the extra baggage to concentrate all its efforts on webOS. In a related move, the company on Wednesday announced that it has sold its Visual Collaboration assets along with its Halo system to Polycom for $89 million.

The deal is being projected as a “great win for both companies, it’s a win for customers” as Polycom can leverage these assets to compete with Cisco in the video conferencing business. Polycom, in turn, will make its video applications available for HP’s webOS platform. Hewlett-Packard also agreed to exclusively sell Polycom’s products to HP customers.

To be honest, HP’s high-end video conferencing business (dubbed ‘Halo’) has always been a low-end ball in terms of revenue and profit. The technology was introduced in 2005 and provides conference rooms lined with large, high-definition screens to simulate a high-quality telepresence experience. However, the hefty price tag of $550,000 per room and exorbitant service fee meant the technology was never adopted on a mass scale. Incompatibility with other video conferencing systems has also been a major thorn in Halo sales.

Clearly, Polycom’s first action item is to make Halo work with its existing video-conferencing systems. After all, the closed-wall approach may work for mobile platforms, but it’s certainly a recipe for disaster in the video conferencing segment. Polycom CEO Andy Miller says he isn’t worried about Microsoft’s Skype buy as his company operates mostly in the enterprise video conferencing segment.

Interestingly, the Polycom-HP deal makes it one a piece amongst the title contenders in the video conferencing industry. Last year, Cisco scooped up Tandberg ASA for $3.4 billion deal. Last month, Microsoft made the biggest deal in its history with the acquisition of Skype for $8.5 billion. Polycom says it would expand its existing partnership with Microsoft to further strengthen its video conferencing portfolio. Analysts believe the deal will help Polycom emerge as a stronger player against Cisco and Logitech.

Leo Apotheker, Hewlett-Packard’s chief executive, has been vocal about his plans to aggressively focus more on the tablet and cloud segments. The company recently lowered its financial outlook for the year, largely due to sluggish sales in the PC segment. Therefore, the decision to let Halo go isn’t entirely surprising.

In 2009, when Cisco acquired Tandberg, analysts predicted there’s a strong likelihood of HP acquiring Polycom. Less than two years later, Polycom is buying out HP in this market. Some believe this  upside-down deal makes little sense while others argue that HP is better off letting Halo go to nurture webOS. What is your opinion on this deal? Please share your thoughts by leaving a comment below this post.

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Written by: Gaurav Kheterpal. www.digitcom.ca. Follow TheTelecomBlog.comby: RSS,TwitterFacebook, or YouTube.

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June 3, 2011 at 7:07 pm
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