Cisco (www.cisco.com) has bought Tandberg (www.tandberg.com) in a cash offer valuing the Norwegian company at USD 3 billion. Cisco says the aim is to get Tandberg’s videoconferencing products and capability.

It will flesh out Cisco’s product line, for sure.

It does more than this, as Cisco’s TelePresence, introduced in 2006, has not prospered as the company hoped. It’s a Rolls-Royce of a product that has probably garnered only a few hundred installations among Fortune companies. One of its severest limitations has been its proprietary architecture. Cisco set out with the aim of owning the videoconferencing market - like Microsoft dominated the desktop - by being proprietary and soooo expensive.

Tandberg, like several other companies in the videoconferncing game Avaya, LifeSize, Polycom for example, has stuck to industry standards. H.323 is the most prominent of a series that covers multi-media transmission over ISDN, H.239 extends this to multiple channels on a single session and H.225 is concerned with signalling protocols.

Products conforming to these standards can all interoperate. Cisco’s products can’t.

Except that belatedly Cisco has developed software switches such as BTS 10200 that permit compatibility but its not a native compatibility built into TelePresence.

The acquisition of Tandberg, gives Cisco an entrée into a sector, downmarket from where it currently operates. Will it be a worthwhile investment? Profit margins are claimed to be broadly similar to Cisco’s target of 35%. Fredrik Halvorsen, CEO of Tandberg, will apparently lead Cisco’s TelePresence unit if the acquisition goes through.

The whole thing looks a bit like a rescue of a floundering product sector. And there may be a bigger threat.

Peter Burrows in Business Week suggests that the younger generation won’t need videoconferencing – they already have all they need on webcams on their PCs. (http://www.businessweek.com/technology/content/oct2009/tc2009101_844344.htm) Linking a flat panel TV to Skype could offer a cheap and cheerful way of video communication.

If so it may mean videoconferencing of the TelePresence variety is destined to remain a niche market.