Logitech Buys Videoconferencing Outfit LifeSize

PC peripherals maker Logitech International has done its largest ever acquisition, by purchasing videoconferencing system maker LifeSize Communications for $405 million. This definitely represents an interesting new twist in the videoconferencing space. Given Cisco Systems’ $3 billion acquisition of market leader Tandberg a few weeks back (now contested by investors who want a higher price), I would have thought that Polycom or Hewlett-Packard would have gone after LifeSize to fill out their product lines. The Austin-based company, which I’ve written about a few times, has been one of the faster growers thanks to its less expensive, easy to use gear.

What’s most interesting is the potential for Logitech to accelerate the commoditization of videoconferencing. The company specializes in high-volume manufacturing of PC mice, keyboards and other gizmos; it’s video business is essentially webcams, which bring in roughly $250 million of the company’s $1.9 billion in annual sales, says Logitech president Gerald Quindlen. LifeSize, on the other hand, makes stand-alone gear that lets users launch a HD-quality videoconference with a few keystrokes. Quindlen says Logitech will be able to apply its economies of scale and other cost savings to “make video mainstream.” Says LifeSize CEO Craig Malloy, “the opportunity is drive price points to the point that it’s a no brainer for every office and conference room in the world.”

Evidently, LifeSize wasn’t going to pull that off on its own. While rapidly growing, the company is very vertically-integrated for a company its size—with in-house chip designers and other high-priced technology experts. And one source with knowledge of its performance says sales actually dipped slightly in its most recent quarter.

But together, LifeSize should get the resources to make a go of its strategy to bring videoconferencing down maket. Malloy admits he was puzzled when Logitech first came a courtin’, as he had talked mostly with Cisco, Polycom and other traditional market players. But Quindlen shared his view that videoconferencing was nearing an inflection point when sales would take off—the way the netbook market did, when the chips, displays and software got cheap enough.

With LifeSize off the market, the pressure on Cisco to complete its Tandberg bid rises a notch. That’s because there simply aren’t many players of consequential size in the videoconferencing market.

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