By Krithi Rao, Industry Analyst, Unified Communications

As we expected, the Cisco-Tandberg acquisition is having a snowball effect in the videoconferencing market. Soon after the Cisco-Tandberg announcement, Logitech followed with its acquisition of LifeSize. The most recent one is Radvision and Aethra. Radvision is the third largest vendor in market share in the video network infrastructure market, which includes products such as videoconferencing bridges, firewall traversal, gateways and videoconferencing management software. This week Radvision announced its intent to acquire the HD videoconferencing endpoint assets of Aethra for a price of approximately $10 million. Aethra is one of the leading providers of videoconferencing endpoints in Europe. Radvision plans to integrate Aethra's HD video endpoints with its network infrastructure and desktop solutions to offer a full portfolio. The transaction is expected to be effective starting Q4 2010.

There is no doubt that this is a required move for Radvision for a couple of reasons. Cisco buys close to 40 percent of Radvision's videoconferencing network products. With the acquisition of Tandberg, Cisco now has competing products to replace the products it OEMs from Radvision. Radvision's revenue stream from Cisco is likely to disappear over a period of time. The company had to look for additional sources of growth.

In the last few years, Polycom and Tandberg have both reaped the benefits of offering an end-to-end product line whereas Radvision remained as a infrastructure vendor only, relying on its partnership with smaller independent endpoint vendors. Owning its own line of endpoints portfolio will provide it with a definite competitive advantage. Radvision took the first step in this direction recently with an executive desktop videoconferencing product jointly developed with Samsung. The Aethra acquisition will bring a full portfolio of endpoint products to Radvision.

I see a number of synergies and challenges associated with the acquisition. Aethra has been having financial difficulties in the recent past.  It has also been struggling to establish itself in North America. Radvision's channels and presence should finally help break that barrier for Aethra products. Post acquisition, integration of the two vendors' products should not be a problem since Aethra already had a long standing OEM relationship with Radvision. On the flip side, Radvision has traditionally relied on its partners such as LifeSize and Sony and their channels. With this acquisition, Radvision will have to quickly re-think its channel strategy.

An interesting aspect of the announcement is that Radvision is acquiring only the high definition portfolio from Aethra. Aethra has a broad range of standard definition endpoints as well. While the future of the market lies in HD, there still exists a large installed base of SD endpoints today and groups of people who will continue to use SD going forward. Examples are specific regions in APAC and Latin America where bandwidth is scarce and SD video quality is sufficient for the use case.

What does this mean for other endpoint vendors? With an excellent portfolio of videoconferencing network infrastructure products, Radvision has been the OEM partner of choice for most standalone endpoint vendors in the market, including LifeSize and Sony. Even though Radvision's products are standards based and will continue to interoperate with these vendors endpoints, one can expect Radvision to focus on selling its own complete portfolio, leaving these vendors to fend for themselves. What does this mean for UC vendors? The combination of Radvision and Aethra, if executed well, provides another choice in addition to Polycom if they are looking for an end-to-end solution partner in videoconferencing. This puts them in a better position to compete with the Cisco-Tandberg combination.

This is definitely not the end of the consolidation trend. UC vendors are looking at offering their customers end to end communications suite and videoconferencing vendors need to step up their strategy if they need to survive. We can expect to see further M& A activities going forward.