WebEx & the Human Network

Cisco spent a whole bunch of their $20B in cash today and purchased WebEx for $3.2B.  This is especially touching to me as I was an early employee at WEBX and still have a bunch of friends over there.  I’m very excited for them as I think that this is a great deal for both Cisco & WebEx.

First, Cisco owns the router business.  A significant portion of Internet traffic is going through Cisco routers, but they aren’t making any dough on that traffic.  While the growth of the router industry for the next couple of years is going to be decent, I can’t imagine that it is going to set any records.  With the exception of a big pop last August, their stock has been pretty flat for the past 3 or more years.  This would explain their buying binge over the past couple of weeks.  Cisco needs these content providers like WebEx & FiveAcross in order to generate a more recurrent / predictable / growing revenue stream.  In the grand scheme of things, WebEx’s $380M a year in revenue won’t make a huge dent in their $30B in revenue a year, but 10 WebEx’s, will.

I tend to agree with Om Malik’s opinion in that they may be doing acquisitions like this in order to compete with everyones favorite frenemy, Microsoft.  It does seem like a great deal for the WebEx guys as now they have a hella deep pockets to extend their already majority market share.

The thing that is really amazing to me is the valuation that they received.  Coming from a company that was just acquired for $3.2B, I look at this deal of selling for almost 10x revenue and really think that we got a raw deal.  I look at YouTube being acquired for an unknown multipler and wonder if I should really be focused on selling software or get back in the Web 2.0 space.

Congrats, WebEx guys!!!

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