Logitech Gets a Life in Big-League Videoconferencing

PC peripherals maker Logitech has announced it is acquiring LifeSize Communications for US$405 million in an all-cash transaction. The purchase of the high-end video equipment manufacturer places Logitech squarely in the middle of the enterprise video-conferencing industry.

Acquiring LifeSize’s high-definition video communication applications — not to mention its 9,000 corporate customers — would allow Logitech to target companies that are further up the food chain from its current webcam customer base.

The goal is to deliver HD-quality video communication in the boardroom, on the office desk, in remote-location meeting rooms, as a telecommuting option, or as a mobile offering, according to Gerald P. Quindlen, Logitech president and chief executive officer.

Logitech and LifeSize also plan to pursue deals with unified communications, collaboration and VoIP companies as part of their larger interoperable video communication strategy.

LifeSize will remain a separate division in Austin, Texas, under the current CEO, who will report to Quindlen. Logitech expects the acquisition to be neutral to slightly positive to its operating income in FY 2011.

The acquisition, which is subject to customary closing conditions, including antitrust approval, is expected to close in December. Logitech did not return a call from the E-Commerce Times by press time.

A Unified Play

The unified communications piece of the transaction will be key to its success, David Lemelin, an analyst with In-Stat, told the E-Commerce Times.

“This acquisition gives Logitech the opportunity to move into video conferencing for mid-sized and larger-sized businesses that might be multilocationally based. These firms tend to have dispersed workforces and use a combination of desktop and video conferencing,” Lemelin explained.

“The ability to unify and combine those various technologies with unified communications is therefore very important,” he added.

Such an acquisition — and the collaborative capabilities it will provide — was essential for Logitech if it wanted to compete with Cisco and Polycom, noted Lemelin.

Industry Pressures

The video-conferencing market is rapidly consolidating, in large part due to competitive pressures.

Last month, Cisco announced that it would acquire Tandberg for $3 billion. That deal is now in jeopardy, as several of Tandberg’s shareholders position for a higher asking price. The tender offer was set to expire Monday, but the deadline has been extended to Nov. 18.

With Logitech now looking to snatch up LifeSize — one of the few large-sized vendors available for acquisition — the stakes have increased for Cisco, Lemelin said.

“LifeSize is pointed at the same market as Tandberg and Polycom,” he observed. “Its acquisition takes out another player that can service companies that range from small entrepreneurial size to the midmarket, or multilocation-sized firms.”

Pressure has also increased for Tandberg to close the deal, Andrea Belz of Belz Consulting, told the E-Commerce Times.

“Tandberg will have a harder time competing against Logitech-LifeSize as a combined force and may find that it needs Cisco more than previously thought,” she suggested. “The pace will certainly pick up on that deal closing.”

It will also be interesting to see what happens with Polycom — the last remaining independent and like-sized vendor in this space, she added. “Will Cisco go after Polycom instead if Tandberg can’t close a deal? Or will Polycom keep growing?”

Mission Critical

Regardless of the outcome of the Tandberg acquisition, Polycom will continue on an independent growth trajectory, said Joan Vandermate, VP of marketing in the video solutions group at Polycom.

What Logitech’s acquisition suggests is that the video-conferencing industry is about to go mainstream, she commented.

Although it has traditionally been a standalone app, video conferencing is becoming part of a greater unified communications environment, Vandermate told the E-Commerce Times, “a peer app with other communications mediums, including IM and presence, telephony and Web conferencing.”