News
Cisco To Pay $3.2B for WebEx
Cisco Systems Inc. said Thursday that it has agreed to acquire the online meeting
company WebEx Communications Inc. for about $3.2 billion in cash.
Cisco, the leading maker of routers and switches that direct data over computer
networks, said it will pay $57 per share of WebEx. That represents a 23 percent
premium over WebEx's closing price of $46.20 Wednesday on the Nasdaq Stock Market.
Shares of WebEx soared $10.53, or more than 22 percent, to $56.73 in early
trading on the Nasdaq Stock Market. Cisco shares lost 6 cents to $25.79 on the
same exchange.
Cisco said the acquisition has been approved by both boards and is expected
to close in the fourth quarter of fiscal 2007. Cisco said it expects transaction
to have an immaterial 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.
The San Jose-based company has recently made a number of acquisitions branching
out from its core business of supplying networking gear and into communications,
social networking and other areas that help drive traffic over the network and
increase demand for its core equipment.
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 H. 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. Some also suggested that Cisco could have snagged
the company at a much cheaper price had it acted sooner. WebEx's stock price
rose more than 56 percent since last year, based on the company's closing price
before the deal was announced.
However, some industry observers said the deal is a perfect fit for Cisco's
Linksys division, beefing up its offerings for small businesses. The deal also
will also give WebEx access to larger business customers and the opportunity
for expanded growth worldwide, said Roger Kay, president of Endpoint Technologies
Associates Inc.
"From Cisco's point of view, it makes some sense: You're beefing up Linksys,
you're grabbing a player that can help increase the value of the Linksys franchise,
and you're a grabbing a player that's already well established in markets you've
assessed will have high growth rates," Kay said.