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HP inks strategic deal with Polycom, abandons Tandberg

March 20, 2010 | Howard Lichtman

By S. John Tilak

 BANGALORE, March 19 (Reuters) - Hewlett-Packard Co (HPQ.N) signed a strategic deal with Polycom Inc (PLCM.O) to sell the video conferencing company's products and said it was terminating its relationship with Norway's Tandberg ASA (TAA.OL).

The deal boosts Polycom's position against Cisco-Tandberg and helps HP -- which offers high-end telepresence services through its Halo brand -- to broaden its reach in the video conferencing market.

HP, which competes with Cisco in the server and networking markets, joins a group of seven of Polycom's strategic partners, which include Microsoft (MSFT.O), Juniper (JNPR.N), Avaya, Broadsoft, IBM (IBM.N) and Siemens.

Polycom has been strengthening its partnerships in the light of networking behemoth Cisco Systems Inc's (CSCO.O) planned acquisition of Tandberg, Polycom's main rival.

HP has been a key Tandberg partner.

"What's changed in the relationship is we've now chosen to go with Polycom," said Richard Skoba, director, Worldwide Strategy Unified Communication and Collaboration, HP Services.

The deal is strategic for HP because both Polycom and HP have relationships with Microsoft, Skoba said in an interview with Reuters.

Last year, HP and Microsoft launched a four-year initiative to deliver unified communications and collaboration services, expecting to invest up to an additional $180 million.

"Polycom now allows us to take it from high-end telepresence rooms to all the way down to desktop level and everything in-between (from) conference rooms and board rooms," Skoba said.

  hp-halo-banner.jpgFor Polycom, the move is expected to help it compete effectively with Cisco-Tandberg.

"It will allow us to gain market share against Cisco and Tandberg," said Andrew Miller, executive vice president, Polycom.

Revenue as a result of the partnership is expected to kick in from the second half of 2010, said Miller, who was CEO of Tandberg from 2002 to 2006 and has worked with Cisco.

Polycom and Tandberg control three-fourths of the video conferencing products market, which is expected to nearly double to $3.8 billion by 2013, according to market researcher Gartner.

Earlier this week, the Financial Times said private equity firm Apax Partners [APAX.UL] had been talking with Polycom Inc (PLCM.O) to take it private for more than $3 billion.

Miller declined to comment on the report.

Shares of Polycom closed at $31.34 Friday on Nasdaq. (Reporting by S. John Tilak; Editing by Jarshad Kakkrakandy)

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