Daily Archives: October 1, 2009

Will Polycom be Acquired in Aftermath of Cisco’s Tandberg Buy?

With Cisco announcing its acquisition of Tandberg earlier today, many analysts shifted their attention to Polycom. That’s because Polycom is the number-two player, behind Tandberg, in the videoconferencing-systems market. One could make a logical inference that, with Cisco taking possession of Tandberg, Polycom becomes a takeover target for anybody intent on entering the space.

In the long run, Polycom probably won’t remain independent. Nonetheless, I don’t envision anybody making an immediate play for it.

That’s partly because, as Larry Dignan notes at ZDNet, Polycom is not a pure-play videoconferencing company. As anybody who’s done time in boardrooms during the last few decades will attest, Polycom is a longstanding vendor of audio teleconferencing systems. The value inherent in that part of Polycom’s business might not be fully appreciated by a vendor desirous of Polycom’s videoconferencing systems. An IBM or HP, to use hypothetical examples, might want only the video side of Polycom’s business, undervaluing or declining to buy the audioconferencing side of the house.

The fact that Polycom has a business that is more diversified than Tandberg’s makes it more complicated as an acquisition target.

A second consideration is whether Polycom really is in demand simply because Tandberg has been taken off the table. I’m not sure the logic follows, if only because not all the companies sizable enough to acquire Polycom will be inclined to follow Cisco’s lead.

HP, for example, is focused on data-center convergence; Dell is locked down on trying to integrate and assimilate its acquisition of Perot Systems; Siemens is in the midst of a painful restructuring and seems disillusioned with its forays into information technology; IBM, like HP, is focused on data-center convergence; Avaya is trying to complete its acquisition of Nortel’s enterprise business assets.

I just can’t image Sony, which is trying to get is consumer-electronics house in order, taking a detour into enterprise conferencing; nor do I see Juniper making a big bet on videoconferencing when it’s trying to take market share from a potentially distracted Cisco in meat-and-potatoes enterprise.

Is there anybody else? Does Microsoft want to enter an enterprise hardware business? Probably not, though it’s clear that Cisco and Microsoft are increasingly competing for business in enterprise communications and collaboration.

There’s no rush for Polycom. It doesn’t need to find a white knight. As a strong, independent player in videoconferencing systems, Polycom isn’t about to fall off the face of the earth because Cisco bought Tandberg.

If anything, Polycom will find it has more friends, in the form of resellers and technology partners, than it had last week. As Cisco’s acquisition of Tandberg goes through the approvals process, Polycom will have an opportunity to capitalize on the transition. It should be able to maintain its own market share, and it will have a chance to steal share from Tandberg.

For the time being, Polycom isn’t going anywhere. It won’t have to go begging for a bigger play to take it out. A buyer might step forward at some stage, but don’t look for anything to happen immediately.

Defending Its Consumer Turf, Symantec Attacks Microsoft Security Essentials

Symantec knows its consumer market is threatened by Microsoft Security Essentials (MSE). It doubtless recognizes that, during a period of protracted economic austerity, free anti-malware protection — provided it is good enough to do the job — will frequently beat for-pay anti-malware.

The challenge for Symantec, then, is to convince the world that Microsoft’s restyled anti-malware suite is so inferior as to represent a near-mortal risk for anybody who adopts it. Alternatively, Symantec must prove definitively that its own anti-malware protection is so superior to Microsoft’s that it warrants the hard-earned money consumers must pay for it.

Given what’s at stake for Symantec, we should not be surprised that the company has unleashed the labs of war. Symantec today clamorously calls attention to an anti-malware report it commissioned from Dennis Technology Lab, “an independent testing lab based in the UK” with which I am unfamiliar and for which I could not locate a website.

Still, questions about the provenance of the research aside, let’s consider the results of the Symantec-sponsored bake-off.

As explained by Network World, Dennis Technology Labs tested how well each of the two vendors’ anti-malware products (Norton Antivirus 2009 and the prerelease version of Microsoft Security Essentials) could defend a desktop computer running Windows XP Professional SP2, Internet Explorer and Outlook Express, subjected to 50 instances of threats originating either as Web-site malware, e-mail, or downloaded files.

In a weighted score based on a points system, Symantec scored an 80, with 45 successful defends, and 5 compromises. Microsoft Security Essentials scored a 44 with 33 successful defends, 4 neutralized threats, and 13 compromises.

Symantec rejoiced at the results. Jens Meggers, vice president of engineering for Norton products, alleged that MSE was just “stripped-down OneCare,” a lighter version of Microsoft’s discontinued for-pay Live OneCare anti-malware. Meggers charged that the MSE scanning engine, which he argues is practically the same as the one that powered OneCare, is “very average—nothing outstanding.”

He also says the Microsoft technology is fat and old, presumably like a former athlete having trouble navigating a midlife crisis. According to Meggers, Microsoft is seeking effectiveness by desperately creating a signature for every malware sample — hence producing a large code base — instead of deploying efficacious and slimmer reputation-based and behavior-blocking defenses.

For its part, Microsoft has launched a counterattack. A Microsoft spokesman told IT Brief that MSE is not a stripped-down version of the Microsoft OneCare product.

Said the Microsoft representative:

“MSE is built to address market changes and consumer needs and includes real-time antivirus, antispyware and core anti-malware functionality while utilising fewer computing resources.”

This Microsoft spokesperson also noted that MSE has performed strongly in independent laboratory testing and has been certified for anti-malware protection by West Coat Labs. He or she also said MSE is not based exclusively on signature technology and that it is automatically updated at regular intervals to ensure that its protection is up to date.

Still, Meggers wasn’t the only Symantec employee taking the hacksaw to MSE. On a Norton blog, Mike Plante, a senior director for worldwide marketing strategy and branding of the company’s consumer products, exulted as follows:

The bottom line: MSE falls short of protecting against today’s aggressive malware and zero-day threats. Norton nearly doubled the protection provided by MSE in malware detection, scoring an 80 compared to MSE’s 44 using DTL’s Accuracy scoring system. (This scoring system awards two points for blocking exploits altogether, one point for letting an exploit onto a system but then successfully neutralizing it, and deducts two points for every exploit that compromises a system.)

With today’s crime-fueled threat landscape, consumers need more protection, not less. That’s why we added our new reputation technology, code named Quorum, to our 2010 products. Quorum provides a revolutionary third layer of protection against real-world threats. While Microsoft is stripping down and delivering less protection, Norton is delivering more comprehensive protection from the bad guys.

At the end of the day, MSE is a rerun no one should watch.

That’s a vituperative attack, no question. Some blog commenters felt Plante went too far, and one even referred him to a different Microsoft competitor’s blog commentary that evinced a more subdued response to MSE. That blog post, from Alex Eckelberry of Sunbelt Software, is a well-reasoned, perceptive, and thoughtful analysis, which I wholly recommend that you read.

In short, Eckelberry thinks MSE isn’t bad at all, and he commends Microsoft for doing its part to help secure consumers’ PCs. He sees MSE as more of a threat to other free anti-malware than to for-pay offerings from the likes of Symantec, though he warns that the “incumbents should not underestimate the wrath that many users have about their products,” and he says that “emotional reaction may play a part in Microsoft getting traction.”

Why can’t Symantec take a similarly dispassionate view of MSE?

Microsoft really doesn’t want to destroy or kill the anti-malware market. That’s not its objective with the release of MSE. Instead, at long last and very belatedly, Microsoft is taking direct responsibility for securing the operating systems and applications it sells to its customers. There’s nothing wrong with that.

Some might argue convincingly that Microsoft had no choice, that security concerns about Windows were driving consumers into the arms of Apple and could conceivably lead to further losses to Google, with its forthcoming web-optimized Chrome operating system.

That said, Microsoft’s MSE does seem to be good enough to eviscerate other free anti-malware offerings, and it might even be good enough to take share away from the for-pay consumer offerings of Symantec and others. In fact, as I noted before, Symantec will lose market share to Microsoft in the consumer anti-malware market. The question is, how much share will Symantec lose?

Symantec’s overheated reaction to MSE indicates that it will fight furiously for every consumer subscriber. In the end, though, consumers will decide whether they want a good-enough free suite or an alternative with a few more bells and whistles that will require them to dig into their pockets.

In an unforgiving economic environment that is unlikely to improve dramatically in the foreseeable future, consumers will be looking to save money wherever they can. Symantec might rage against the dying of the light, but it probably is destined to bitterly and grudgingly surrender a significant chunk of its consumer market share.

Cisco Positioned for Video-System Dominance with Tandberg Acquisition

Cisco today announced a $3-billion all-cash acquisition of Tandberg, a major player in enterprise videoconferencing systems.

The acquisition makes good strategic sense for Cisco, giving it a range of cost-effective videoconferencing systems — scaling upward from the desktop all the way to telepresence kit — and video-management capabilities to fill out a product portfolio that was top heavy with high-end, room-based telepresence offerings.

Although initial concern was expressed regarding geographic and time differences between San Jose and Oslo, Cisco is confident that the corporate cultures are simpatico. John Chambers even called Tandberg a “Silicon Valley company in Norway.”

Cisco is paying an attractive price for Tandberg, just 11 percent above Tandberg’s closing share price yesterday. Even though Tandberg’s board of directors is pushing for the transaction to be approved, the acquisition won’t close immediately, giving others a chance to outbid Cisco.

Mentioned as potential Tandberg suitors are HP, Sony, IBM, Siemens, and Juniper. Realistically, though, only HP now has the means and motivation to give Cisco a run for its money. The other companies have other strategic priorities or are preoccupied with cost-cutting and restructuring.

Given the relatively low price Cisco is paying for an asset that will make it a dominant player in videoconferencing systems and telepresence, I would not be surprised if Cisco’s plans are disrupted by a shareholder revolt along the lines of the one that met Google’s acquisition bid for On2 Technologies. In fact, Tandberg’s board might have questions to answer regarding the timing and price of the sale.

Tandberg CEO Fredrik Halvorsen said the following:

“We believe that Cisco, with its breadth of expertise and proven track record of integrating acquisitions will be a strong owner of Tandberg’s business. Cisco’s ownership will strengthen Tandberg’s position to serve our customers and partners with even greater innovation, and to expand opportunities for our employees.”

Some shareholders might demand a stronger justification.

Meanwhile, Polycom, which competes against Tandberg and Cisco, isn’t happy about the deal. Polycom is alleging that the acquisition will reduce competition, limit customer choices, and imperil work on industry standards for video-based communication and management.

Wrote Stefan Karapetkov, director of emerging technologies at Polycom:

Cisco announced today that they will acquire Tandberg, and this will have significant impact on the video communications market. It will reduce competition, and limit customers’ choices, especially in the telepresence space. It will hurt Radvision who now fills the gap in Cisco’s video infrastructure portfolio.

I am however more concerned about the standards-compliance that have been the pillar of the video communication industry for years. Tandberg and Polycom worked together in international standardization bodies such as ITU-T and in industry consortiums such as IMTC to define standard mechanisms for video systems to communicate.

Cisco on the other hand is less interested in standards, and considers proprietary extensions as a way to gain competitive advantage. The concern of the video communication industry right now should be that the combined company will be so heavily dominated by Cisco that standards will become last priority, far after integrating Tandberg products with Cisco Call Manager and WebEx.

Telling is the fact that both Tandberg and Cisco declined participating in interoperability events over the last few months.

The vehemence of Polycom’s reaction suggests that Cisco has made an adept move likely to pay rich dividends.

Despite Pollyannaish optimism about a fabled recovery, most wise souls realize torpid growth and rigorous cost controls will be with us for a while. While Cisco is right about how enterprise utilization of video technologies can reduce corporate travel budgets, Cisco’s high-end telepresence solutions are prohibitively expensive for the vast majority of businesses, even for many large enterprises.

Meanwhile, John Chambers and his team noticed that Tandberg’s video systems are installed at many Cisco accounts. Tandberg offers videoconferencing products that customers can afford and justify during a prolonged period of lean corporate budgets.

According to a Reuters report, Tandberg sells about 15,000-16,000 of its regular videoconferencing units every quarter for about $7,500 each, while Cisco has sold fewer than 10,000 in total of its TelePresence systems, which cost about $250,000.

In the big picture, it is in Cisco’s strategic interest for video-based communication to be adopted broadly and quickly. Video uses more bandwidth and requires more control and management than data or voice traffic. The more video that is consumed, the more that service providers, enterprises, and consumers will need upgrades to networking gear.

Tandberg has considerable strategic value to Cisco. Let’s see whether HP, increasingly becoming a chief rival to Cisco, chooses to fight them for it.