Cisco to buy Norwegian maker of video systems

Cisco Systems Inc. said Thursday it had agreed to buy Norway’s Tandberg for $3 billion in cash in a bid to dominate the global market for videoconferencing equipment.

The world’s largest maker of computer networking equipment, Cisco has been focusing on the high end of the videoconferencing market, selling systems with multiple plasma screens that present life-size images of the participants to provide the illusion of face-to-face communication.

With Tandberg, Cisco gets the leading maker of video systems that range from small “videophones” to full conference-room setups. Tandberg had 40% of the global videoconferencing market in the second quarter, according to Wainhouse Research.

No. 2 was Pleasanton, Calif.-based Polycom Inc., with 34% of the market.

Industrywide sales of videoconferencing equipment have held up relatively well in the global economic downturn, falling 6% in the second quarter from a year earlier, as companies cut back on travel, Wainhouse said.

Tandberg’s shares rose 11% in Oslo to match the per-share value of the Cisco offer.

Cisco’s shares fell 1.9% on Nasdaq, while Polycom slumped 4.4%.

San Jose-based Cisco had more than $35 billion in cash on its books at the end of July, most of it overseas. By buying a foreign company, the company avoids the U.S. taxes it would have to pay to bring the money home.

Cisco’s most recent major acquisition was also video-oriented: It bought San Francisco-based Pure Digital Technologies Inc., maker of the popular Flip camcorder, for $590 million.

Tandberg, with headquarters in Oslo and New York, employs 1,500 people.