Logitech zooms on a $405 million deal for LifeSize

Posted Nov 11th 2009 11:30AM by Tom Taulli
Filed under: Competitive Strategy, Cisco Systems (CSCO), Technology

Back in 1981, Logitech (LOGI) began selling computer mice. It was excellent timing. Now, the company is the dominant player in the market for peripherals.

But to continue the growth, Logitech has been expanding into new categories. One of the biggest is video conferencing. In fact, Logitech has announced that it will pay $405 million for LifeSize Communications, which is a major player in the market.

While videoconferencing is likely to become mainstream, it can still be expensive and difficult to operate. However, LifeSize has been able to effectively deal with these two problems. For example, the company has used cheaper technologies to deliver a high-definition (HD) viewing experience.

So far, it's worked quite well. LifeSize has 9,000 customers in 80 counties and revenues are expected to reach $90 million this year.

This is certainly impressive. Yet, LifeSize probably had little choice but to sell out. Keep in mind that Cisco (CSCO) is building its own footprint in video conference. Part of this strategy is to purchase Tandberg for $3 billion. The company is a direct competitor to LifeSize.

So as a part of Logitech, LifeSize will get a boost from more extensive distribution and stronger manufacturing capabilities. Besides, the Logitech brand should help with customer traction.

In Wednesday morning trading, Logitech's shares were up 2.5% to $18.51.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: Cisco, CSCO, LifeSize, LOGI, Logitech, Tandberg, videoconferencing