Thursday, June 02, 2011

HP Loses Its Halo to Polycom ... for a Song

Wow! In what seems like a steal, Polycom just announced that it is acquiring HP's videoconferencing unit (including its much ballyhooed Halo telepresence enterprise initiative) for a mere $89 million in cash. "Telepresence" is simply a marketing name coined to signify high quality video conferencing and differentiate it from failed business video conferencing initiatives in the past. As some of you may know, prior to Sorenson Media, I was CEO of video chat and conferencing service SightSpeed (which was acquired by Logitech in 2008). So, naturally, this announcement is of special interest to me.

It wasn't that long ago that HP announced its Halo telepresence initiative with great fanfare (2005 to be exact). During that initial push, and over time, it is not unlikely that HP spent nearly how much it netted in this Polycom deal on Halo-related marketing. When it launched, Halo was essentially the first real enterprise telepresence player. But, that soon changed when Cisco countered with its own telepresence initiative in 2006 (in fact, Cisco was the one that first broadly used the term "telepresence" for marketing differentiation from Halo and others). From that point, HP distanced itself from Cisco by touting itself as being more cost-effective and more flexible in terms of implementation.

I recall myself driving to HP's offices in Palo Alto to discuss a possible videoconferencing partnership to extend HP's Halo service to the desktop and other personal computing devices via SightSpeed. In that meeting, a number of HP execs attended via Halo. This was my first Halo experience. Impressive, yes -- but, was it all that different and more impactful than using a video chat service like SightSpeed or Skype in a conference room (which we did at SightSpeed and which we continue to do to great effect at my current company)? No, not really. Certainly, in my view, not worth the cost (not by a long-shot).

Apparently, others felt the same way and HP simply couldn't make Halo and telepresence work as a viable business. And, for those Fortune 100 companies and government entities that could afford the extremely costly telepresence systems, Cisco stole the show and ate HP's lunch.

So, here we are:

(1) HP nets $89 million for a service it developed and marketed via hundreds of millions of dollars over time;

(2) that price tag is not of a significant magnitude over what our little company, SightSpeed, netted in late 2008 in the worst economic conditions in over 75 years ($30 million);

(3) business video conferencing as an overall market opportunity is only increasing in importance with the power of video engagement and collaboration being available anytime and anywhere;

(4) for that reason, Skype sells for $8.5 billion to Microsoft in the past month (remember, video chat and conferencing is increasingly important to Skype and its user base).

Bottom line -- Polycom needed a new video conferencing technology story to keep up with the increasing competition in its business conferencing space, as well as to more aggressively pursue the fast-growing enterprise video conferencing market. After all, who really has been using Polycom video conferencing units for the past 5 years? And, it found a willing seller in HP.

Polycom scored here. It simply got a price it couldn't refuse.