Lifesize's New Portable VideoConferencing System

Last week, Cisco stole the headlines with its $3 billion purchase of Tandberg, the second-largest player in the videoconferencing market Cisco was number three. If the deal closes, Cisco will still trail Polycom, but will be a very strong No. 2 with traditional videoconferencing systems. By traditional, I mean “enterprise”-style videoconferencing systems, which run on pricey special purpose videoconferencing gear, that often run over hard-wired private networks.

But the day before Cisco’s deal was announced, I met with Lifesize Communications CEO Craig Malloy, who has a very different view of how videoconferencing will evolve. The best expression of his view was unveiled today: a modem-sized gizmo called the Passport, that is essentially a portable videoconferencing system. It doesn’t offer the full 1080p high-definition resolution of higher-end systems. But it seems to be remarkably easy to use. Rather than configure those special video switches and that private network, PassPort (like most of Lifesize’s products) works on any plain old Net connection. So once you plug in the ethernet cable, and another cable to your big screen TV or any flat panel monitor with an HDMI connector, you’re ready to videoconference. Lifesize’s marketing head Colin Beuchler attended the meeting from his office in Austin using a Passport, and the image and sound quality were terrific (though the video was a tad jumpy; Malloy promises some last-minute software tweaks will take care of that).

The PassPort also stands out on price. Cisco’s lowest priced offering is $34,000 and Tandberg offers somewhat similar features (in a larger, less portable box) for $7,000. The Passport costs $2500. “Literally, [Cisco’s $34,000 TelePresence system] does nothing more than the Passport does—though they’ll throw in a 37-inch monitor,” says Malloy. Of course, that’s not really true. Just for starters, those private networks are more reliable and less finnicky than the open Internet, and those systems offer more ways to bring more sites into conferences. But if you just want basic video-conferencing, he has a point.

That $2,500 is still too much for most people, most of whom can make due with iChat on the Mac, or Skype. But Wainhouse Research analyst Andrew Davis, an expert in this market, says the Passport could catalyze the market for video-conferencing gear among small and medium-sized companies. Then there’s telecommuters—a category LifeSize says will grow from 18% of the workforce to 35% over the next few years. Some companies may find it cost-effective to outfit some of those people with a cheap video-conferencing system. And some contract workers may find it worth the money; after all, it would pay for itself just by nixing the need for just a business trip or two.

While LifeSize is still a bit player in terms of market share, products like the PassPort suggest the company is likely to have an outsized impact on the market. It’s pushing a more decentralized, democratized vision for videoconferencing. If Cisco’s systems are like mainframes, in their cost, power and complexity, LifeSize wants to be the PC — cheaper, easier to use, and controlled by the user. The company is even in talks with Skype; already, Passport users can type in a Skype address to have audio-only calls with any of the 500 million people who have one. Clearly, the ability to launch video calls with Skype users must be the next step. Then, Passport users could hold Skype calls on most any big-screen TV, rather than have everyone hunch in front of the PC.

So how is LifeSize doing? Malloy says sales have grown 140% in the past 12 months. While he won’t share revenue figures, he says the company has 9,000 customers, and is adding 800 new corporate customers every quarter (Cisco has less than 500, for its much pricier gear). My hunch is that the company already has the revenues necessary to go public, but has work to do on the profits side.

Here’s an awfully jittery video I did with Malloy; I’m recovering from surgery on my right shoulder, and clearly my left hand has the shakes!

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