Cisco and Microsoft Can’t Communicate

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Cisco is once again trying to block Microsoft’s acquisition of Skype, hoping to blunt the software giant’s ambitions in unified communications. Cisco doesn't want to unravel the deal, but rather force technology changes that will strain relations with Microsoft in this burgeoning market segment.

No love is lost between Cisco Systems Inc. and Microsoft Corp. in the race to dominate the unified communications market. For the last several years, the two have been locked in a bitter battle over technologies, products and market share in this emerging segment. Once again, Cisco is looking to blunt its rival’s advances by challenging Microsoft’s acquisition of Skype.

Cisco yesterday asked the powerful European Commission to again review Microsoft’s $8.5 billion acquisition of Skype, claiming the regulatory court erred when it approved the deal following the 2011 acquisition.

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Observers say Cisco isn’t really interested in overturning the acquisition, but rather in having European regulators force Microsoft to open its protocols and provide better integration with Cisco’s Telepresence and video-conferencing products.

Cisco claims its Telepresence products -- technology that emulates real-world meetings through expensive HD video and audio equipment -- is a strong revenue-generator, and its collaboration unit is a billion-dollar business. However, last year, Cisco saw a steep drop in video-conferencing sales as competitors fielded “good enough” alternatives.

Worse for Cisco (which pegged telepresence as the technology to replace revenue for its declining commoditized products): All video-conference players -- including those from Avaya Inc., Polycom Inc., LifeSize -- have seen growth blunted by free alternatives and consumer products, such as Skype.

Over the last two years, Cisco has struggled with other communications products, discontinuing the Cius communications tablet and the Umi video conferencing system.

Cisco's fear centers on the integration of Skype and Microsoft's desktop communications and collaboration system Lync -- that it will further erode Telepresence and WebEx collaboration sales if easier integration isn’t made available. The European challenge, some say, is designed to compel Microsoft to change its technology.

The irony: Cisco is seeking to impose changes on Microsoft for which it's often criticized. While Cisco is praised for the quality of its video-conferencing technology, it's beaten for its closed standards that make integration with third-party products more difficult.

Listening inside Cisco, there’s a bitterness toward Microsoft, which was once a chief collaborator and ally in go-to-market strategies and channels. Even as the two battle over communications technologies, Cisco and Microsoft collaborate on virtualized data centers, cloud computing technologies and wide-area network enablement. Cisco lists Microsoft among its top strategic partners.

The European Commission challenge is a side show in this ongoing feud. The real fireworks will come next month when Microsoft reveals integration between Skype and Lync for audio and text messaging. Later this year, Skype and Lync video should be integrated. As these capabilities come to fore, Microsoft and Cisco will pressure partners and the market to choose which platform they will standardize.

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