Cisco: ‘In Norway We Trust’

Cisco: In Norway We Trust

The push to Buy American could start to mean something quite different than a patriotic call to purchase homemade cars and appliances in the coming years.

Sensing a more stabilized economy, the largest technology companies have started to put their massive cash war chests into action, acquiring companies once again. Oracle led the way with its purchase of Sun Microsystems. EMC gobbled up Data Domain. VMware bought the open-source software maker SpringSource. And this week, Cisco made a $3.0 billion offer for Tandberg, a video-conferencing specialist.

It’s Cisco’s acquisition that jumps out because of its European flair. Tandberg is based in Oslo, Norway and provided Cisco with a unique opportunity to use some of its $35 billion in cash.

The vast majority - about $29 billion - of Cisco’s cash sits overseas. Cisco would have faced huge tax penalties to bring that money stateside if it wanted to buy another video-conferencing player like Polycom or LifeSize.

Ned Hooper, a senior vice president at Cisco, said the expected by noting that Cisco’s judges acquisitions first based on their strategic and cultural alignment. Of course, the international angle with Tandberg didn’t hurt either.
We do have a great deal of cash overseas and were able to use the international cash to pay for this transaction,Mr. Hooper said.

Cisco’s foreign cash situation is the most dramatic of the major American technology players, although all of the companies face similar problems.

John Chambers, Cisco’s chief executive, has grumbled about the government nixing a tax repatriation break.

With a major era of consolidation in the technology industry looming, these tax and cash issues seem destined to crop up again, especially as American companies are passed over and left to fend against even larger opponents.

On a more lighthearted note, the acquisition of Tandberg reminded me of a post made back in March about Cisco’s TelePresence video-conferencing systems.

A Sean Tyrrell commented on the post back then saying, If Cisco’s Telepresence is soooo good, why do they have to always give it away? In every global account I am involved in, Cisco gives these things away. The fact is they are expensive to operate, limited in that you can only see a few sites at a time, they ought to call it Tele-Absence.
Mr. Tyrrell, you see, works at Tandberg where he is a global account director, and he’s taken a sweeter tone on Cisco since the deal was announced.

In an e-mail, Mr. Tyrrell said, This is a win-win for both companies, but more importantly, it is a win for our customers and the overall market. I think it is a defining moment in the industry and that video collaboration will reach the masses much faster than it would have had Tandberg and Cisco fought it out alone.
Best of all, Cisco might be able to charge money for its products now.

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