The more I think about this acquisition, more than excitement, it strikes me that yet another pure play company is gobbled up by a major. The deal is a perfectly timed one for WebEx though at $3.2 billion and it opens up options for Cisco. There is already a bunch of startups that provide cheaper and flexible alternatives like teamslide, dimdim, 1videoconference that are competitive with WebEx and are better at cross platform collaboration. Probably a year down the line would have been stretching it too much for webex to have had this kind of valuation, for a company that posted a profit of $50 million in 2006. 

I am happy about the fact that WebEx was not acquired by one of these Private Equity funds that would have jacked up the valuation within a couple of quarters and probably made a 100% return on it.  

Enterprise communications market is growing rapidly, and companies like Cisco do not have time as a luxury to develop their own offerings. Right or wrong, this is the rationale that is driving many acquisitions, and WebEx is a case in point. Cisco already has a collaboration offering called MeetingPlace, which works on-premise for large corporations. WebEx fits perfectly for their unified communications offerings for SMBs. This service also complements Linksys one hosted VoIP and SmartBusiness Communication offerings for SMBs, that have not disturbed their profitability much.

Now the stage is set on the collaboration front, with WebEx leading the pack, Microsoft’s Live Meeting a slightly distant second (result of the acquisition of Placeware in 2003 and been pushed from the market leader position to second in these four years) and Citrix’s GoToMeeting a very distant third. This probably would be a great acquisition candidate for companies like Siemens and Avaya.

Effectively, most pure play companies will get acquired by bigger companies and consolidation will keep happening at all segments and at all levels. These acquisitions are probably one of the reasons that entrepreneurship still thrives and will continue to thrive.