Polycom to Buy Hewlett-Packard’s Videoconferencing Business

Polycom Inc. (PLCM), the world’s largest stand-alone maker of videoconferencing equipment, agreed to buy Hewlett-Packard Co. (HPQ)’s competing business, including the Halo product line.

As part of the deal, Hewlett-Packard will team with Polycom and resell the products, according to a statement today from Polycom. Polycom video applications will be integrated on Hewlett-Packard’s WebOS TouchPad devices. No terms were given.

The acquisition lets Pleasanton, California-based Polycom add customers as it competes against Cisco Systems Inc. (CSCO) Selling Halo helps Hewlett-Packard Chief Executive Officer Leo Apotheker move away from the less-profitable hardware business to emphasize areas with greater earnings potential, said James Kelleher, director of research at Argus Research Co. in New York.

“It looks like HP might be pushing away from videoconferencing,” Kelleher said. “It’s partly that Leo Apotheker really wants to focus on this being a solutions company.”

The Halo videoconferencing system, introduced by Hewlett- Packard in 2005, relies on large, high-definition screens and high-speed networks to create the impression attendees are in the same room.

PC-Based Services

Videoconferencing is evolving as developers work to bridge the gap between traditional systems costing as much as $300,000 for a just-like-being-there telepresence room and cheaper, lower-quality PC-based services from companies such as Skype Technologies SA.

New customers are the biggest draw for Polycom in the Hewlett-Packard transaction, because Halo is not a “big player” in the market compared with products from companies such as Cisco, Kelleher said.

“Often in a deal like this it’s a matter of enhancing your customer list, particularly when you buy an overlapping technology,” he said.

Polycom also said today it will partner with companies such as AT&T Inc. and Verizon Communications Inc. to create an open video exchange over the Internet using the so-called cloud, and separately expanded communications technology agreements with Microsoft Corp.

“These developments further enable the network effect that we are beginning to experience in video adoption,” Polycom Chief Executive Officer Andy Miller said in the statement.

Polycom rose 16 cents to $57.57 at 4 p.m. New York time on the Nasdaq Stock Market. Hewlett-Packard, based in Palo Alto, California, dropped 75 cents, or 2 percent, to $36.63 in New York Stock Exchange composite trading.

To contact the reporter on this story: Danielle Kucera in New York at dkucera6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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