Cisco joins video-conference foray

By Ritsuko Ando
Reuters
Sunday, October 22, 2006; 9:47 PM

NEW YORK (Reuters) - Network equipment maker Cisco Systems Inc. on Sunday unveiled a high-definition, video conferencing system that it says can grow into a billion dollar business in five to seven years.

Named TelePresence, the product is the latest move by Cisco to expand from its traditional business of network routers and switches into video -- a strategy it launched with the February acquisition of cable set-top box maker Scientific Atlanta.

A few analysts who were given a demonstration said TelePresence will likely compete with Hewlett-Packard Co.'s Halo Collaboration Studio and other high-end video conferencing products by specialist technology firms like Teliris Ltd. and Polycom Inc.

It will be available from December in two versions initially. The basic TelePresence 1000 model, designed for one-on-one meetings, is priced at $79,000 per station.

TelePresence 3000, for larger meetings, is installed in the form of a small conference room with three high-definition screens on which participants are displayed life-size. It is listed at $299,000 per station.

Cisco did not give sales targets, but Marthin De Beer, vice president of its emerging markets technology group, said it would take a few years for the product to turn profitable.

"We think it could be profitable in two to three years. We think it has potential to become a billion dollar business in five to seven years," he told Reuters.

Video conferencing systems have long been touted as a way for companies to cut travel expenses, but they have yet to live up to expectations, partly because of poor video quality and cumbersome technology.

Cisco Chief Development Officer Charles Giancarlo said TelePresence's high-quality screens, as well as speakers and cameras positioned to help users feel like they are in the same room, may persuade companies that have so far shunned video conferencing products.

"The equipment of a few years ago was never able to deliver real-time experience. TelePresence is something totally different," he said.

Cisco said it expects demand for TelePresence to come from a growing number of international companies with offices in places like Bangalore and Shanghai.

Cisco Chief Executive John Chambers recently told his staff to cut the company's travel budget by 20 percent next year with the help of TelePresence.

Hewlett-Packard's Halo room looks similar to TelePresence 3000, but Halo uses a dedicated network rather than a client's like TelePresence. Analysts said it was too early to say which system was better or cost-efficient.

"The question is, can Cisco create the same consistency of quality as HP has demonstrated. Both could succeed," said Howard Lichtman, president of Human Productivity Lab, a consultant to companies that sell and buy video conferencing products.

"Over the next year or so we should see demand for this kind of technology double as early adopters buy more and other companies realize the benefits," he said.

Cisco said it expects to diversify the TelePresence product line in coming years, adapting it for a wider range of institutions such as hospitals, banks, and retailers.