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Siemens-Polycom-Enterasys? Interesting possible merger

During my travels to and from VoiceCon last week, I missed this little nugget about Gores Group approaching Polycom for a possible merger with Siemens-Enterasys.

Citing “people familiar with the situation,” the Financial Times reports that the private equity firm Gores Group has approached Polycom (again) about acquiring the videoconferencing vendor and combining it with Siemens Enterprise Networks, the company Gores formed when it acquired a majority stake in Siemens Enterprise Communications in 2008 and merged it with Enterasys Networks.

Gores first approached Polycom in October, the Times says, but its overtures were politely declined. Gores has come calling again because it heard that another private equity firm, Apax Partners, is also in the hunt for Polycom.

When Cisco Systems announced its plan to buy Tandberg,  Polycom’s primary rival, last October, industry experts told us that Cisco’s rivals in IP telephony, unified communications and networks would gravitate toward Polycom, forming tight partnerships with the enterprise video company in order to offset the broadened product portfolio Cisco would have to offer in unified communications. That’s definitely been borne out by what we’ve seen this year. Polycom announced partnerships with Siemens and Juniper in January. At VoiceCon Polycom and HP unveiled a new relationship that includes marketing and sales cooperation and some future joint technology development.

Now Gores Group wants to take things past the “friends” stage and establish a true marriage of companies. It makes sense from a technology perspective. Siemens puts out a quality UC and IP telephony product. Its OpenScape UC Server 2010 won Best of VoiceCon last week. The Enterasys division of Siemens is also well-respected for its technology. Its customers tend to be loyal.

But would Polycom want to tie itself to a company with such a small North American presence? Siemens has a sturdy international business, but its still just a small timer in the United States. And Enterasys is such a small part of the IP networking industry in general. One would think that if Polycom were interested in merging with a UC and/or networking vendor, it would set its sites one someone like HP ProCurve or Avaya, both of whom are a much “bigger deal.” Avaya was billing itself as the number one vendor in unified communications at VoiceCon, a claim it can now make since it closed the deal on Nortel Enterprise Solutions. HP ProCurve is the number two enterprise networking vendor out there and its a division of HP, one of the biggest IT vendors in the world. Both companies would bring good technology and good market opportunities to the table in a Polycom merger.

On the other hand, Gores Group might present the best option Polycom has for a strategic merger rather than a straight-up acquisition. We haven’t heard any rumors from HP about it being on the hunt for a video vendor. It’s sole participation in the videoconferencing space is its Halo service. Silver Lake Partners, the private equity firm that owns Avaya, may not be in an acquisitive mood after spending $900 million on the Nortel deal. The Times says the Apax-Polycom have put Polycom’s possible price tag at $3 billion or so. If Gores is prepared to spend that kind of money, it could lead to some interesting things for both Siemens and Polycom customers.

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Although HP has its competition with Cisco in place, HP is such a bit player in the video space that it's hard to imagine them going all-in with Polycom. Both Siemens and Avaya would make a lot more sense. Both of those vendors have the same type of open standards approach that would allow them to work well with Polycom and maintain the partner ecosystem that Polycom has been building up. Great article, Shamus!