Startup Blog

Is Cisco Crazy for Buying WebEx?

Posted by Mike Volpe on 3/15/07 2:43 PM

Cisco is buying WebEx. I don't get it. Sure, a lot of Cisco customers could purchase the WebEx product (a lot of them probably do already, WebEx claims 65% marketshare), and I am sure Cisco will be able to grow WebEx sales at a good rate. But Cisco will also have to absorb WebEx's employees, and is inheriting technology that is not that good and is about a decade old. There are a lot of other much smaller companies that have better and newer technology. If Cisco is looking to really get leverage from their customer relationships and distribution, why don't they buy a small startup with newer/better technology than WebEx, and then use the Cisco brand and channel to really supercharge the sales? Why would they bother to pay $3 billion for WebEx (with $380 million in revenue), when they could pay $25 or $50 million for a startup with better technology? The only reason I can think of is that Cisco needs the $380m in revenue and $50m in profit from WebEx to meet its growth goals.
Mike Volpe

Written by Mike Volpe

Mike Volpe is a startup advisor and angel investor based in Boston.

Topics: business model, startup

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