Cisco Acquiring WebEx for $3.2B (UPDATED)

(The last five paragraphs have been added to this story since it was first posted.)

Cisco Systems announced Thursday it will buy online conference provider WebEx Communications for US$3.2 billion to sell collaboration tools to small and midsize businesses.

Cisco will use WebEx’s technology services to build a stronger combination of communications and collaboration platforms for business customers, said Cisco Chief Development Officer Charles Giancarlo.

WebEx markets its technology as a subscription-based service that lets companies hold real-time or asynchronous data conferences over the Internet, and share Web-based documents and workspaces.

The boards of directors at both companies have approved the deal, so the merger now has to clear antitrust regulations in the United States and abroad. Cisco said it expects the deal to close by the end of the fourth quarter.

The deal is the third acquisition in recent weeks for Cisco, which announced March 13 it would buy the file storage management company NeoPath Networks, and said March 5 it had purchased a share in Utah Street Networks Inc., the operator of the social-networking site Tribe.net. Both companies were privately held, and Cisco did not announce the terms of the deals.

The WebEx merger marks another step in Cisco’s effort to diversify from its core business of building switches and routers that control Internet data traffic.

“Collaboration has been a big push for Cisco in the last 12 to 18 months,” said Scott Sinclair, an analyst with Technology Business Research Inc.

Acquiring WebEx should help Cisco to expand from its usual territory in the enterprise market into the consumer and small and medium-sized business markets, Sinclair said. The merger plays into Cisco’s recent moves to build a greater holding of social-networking tools, such as the Tribe.net deal, and a similar acquisition in February of Five Across Inc.

-Ben Ames, IDG News Service (Boston Bureau)

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