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Cisco to buy video firm Tandberg for $3 billion

As part of its expansion into videoconferencing and collaboration, Cisco Systems antes up for the Norwegian video communications company.

Through its latest acquisition offer, Cisco Systems is hoping to grab a bigger slice of the growing video communications market.

Cisco announced Thursday that it will offer $3 billion in cash to acquire Tandberg, a global supplier of video communications equipment.

Based in Oslo, Norway, and in New York, Tandberg provides video networking hardware and software to a wide range of companies looking for teleconferencing and telepresence systems. Tandberg's products range from low-cost desktop tools to high-end conferencing systems.

Cisco has already wet its feet in the worlds of video and telepresence. Two of Cisco's many acquisitions in the last several years--Scientific-Atlanta and Arroyo--furthered the company's grasp of this segment.

But as video becomes increasingly important to enterprise customers, the network giant wants to carve off a greater piece of the multibillion teleconferencing market by integrating Tandberg's technology with its own.

"Cisco and Tandberg have remarkably similar cultures and a shared vision to change the way the world works through collaboration and video communications technologies," Cisco CEO John Chambers said in a statement. "Collaboration is a $34 billion market and is growing rapidly--enabled by networked Web 2.0 technologies."

Once the deal is done, Tandberg CEO Fredrik Halvorsen will lead the new TelePresence Technology Group, reporting to Marthin de Beer, senior vice president of Cisco's Emerging Technologies Group. Cisco said that Tandberg's 1,500 employees will be "extremely important" in fostering growth and innovation for Cisco's video team.

Under the agreement, Cisco will launch a cash tender offer to buy all the outstanding shares of Tandberg for 153.5 Norwegian kroner ($26.45) per share, which comes to a total price of approximately $3 billion. The offer represents a 25 percent premium to the three-month average closing price for Tandberg stock. The proposal has already been unanimously recommended by Tandberg's board.

Subject to the usual regulatory scrutiny, Cisco expects the deal to close during the first half of 2010.