Lifesize Is Better Off If Logitech Sells Its Video Conference Unit

With revenues down, Logitech is looking to unload its video conferencing division, which include LifeSize and Mirial in the next 90 days. Logitech acquired LifeSize for $405M in 2009 just as video conferencing and telepresence were on their way up.

These days the high-end video conferencing market is much tougher. IDC reported that worldwide video conferencing revenue was down 39 percent first quarter of 2012 (compared with the previous year) and down 4.8 percent in the third quarter of 2012.

Video Conference Players Face Stiff Competition From Startups

Competitive startups such as Vidyo and Blue Jeans are disrupting the video conference space with cheaper, software-based solutions, not to mention controversial Chinese heavyweights Huawei and ZTE. Furthermore, businesses are not as quick to purchase these complicated and expensive high-end systems. Even the big players such as Cisco and Polycom have been struggling to pivot in order to keep up with the changing market.

Most recently, Polycom has started pushing its new RealPresence CloudAXIS offering. Just this past week LifeSize and Avaya Radvision have also both announced redesigned “cloud” offerings (LifeSize Icon Series and Radvision Scopia Elite 6000).  Nevertheless, numbers are not looking good as Polycom officials reported Jan. 24 that fourth-quarter revenue came in at $353 million. This is a 9 percent decline over the same period in 2011.

LifeSize Better Off On Its Own

On its own, LifeSize can have a bright future.  LifeSize in the past was able to disrupt the traditional hardware video conference business dominated by Tandberg and Polycom.  By pricing its hardware on the low end of the hardware market and still delivering great video quality, it was able to eat into Polycom and Cisco/Tandberg.  Now the video conference market is having another transformation – where software will dominate hardware.  Companies such as Polycom and Tandberg must either pivot, and pivot hard and fast, or they will lose their former dominance.  Both companies are so large that they will never die, but they may end up with the same fate as famed computer graphics company SGI – now a bare shadow of its previous self.

Without the politics of a huge company such as Logitech, LifeSize will be able the pivot from hardware to software much faster.  LifeSize has a boatload of talented engineers and is lead by seasoned executives of the video collaboration industry who are capable of accelerating the downfall of Tandberg and Polycom.

The problem with Polycom and Tandberg isn’t that they are ignoring the rise of software over complicated hardware. (I’m indebted to many smart Polycom and Tandberg people who have given me advice and help as a first time entrepreneur over the years.) The problem is that large companies are like the Titanic – it is very hard to switch course even when the writing is on the wall.  Their own software will eat into their hardware business, and the near-term loss will be very difficult for their executives and Wall Street to stomach.

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