European videoconferencing vendor acquires CBCI Telecom

July 1, 1997

European videoconferencing vendor acquires CBCI TelecomDeal is second major videoconferencing merger in past yearHoping to create a company that can compete head-to-head with PictureTel and VTEL/CLI in the worldwide videoconferencing

European videoconferencing vendor acquires CBCI Telecom

Deal is second major videoconferencing merger in past year

Hoping to create a company that can compete head-to-head with PictureTel and VTEL/CLI in the worldwide videoconferencing market, Tandberg ASA of Oslo, Norway, has acquired CBCI Telecom for $54 million Canadian (US$38.8 million). CBCI, located in Montreal, Canada, is now known as Tandberg Canada; its U.S. subsidiary, Canvas Visual Communications of Herndon, VA, is now Tandberg, Inc.

Tandberg claims to hold 10% of the low-bandwidth (56 to 384 Kbps) videoconferencing market, and the company believes the merger makes it the third largest videoconferencing manufacturer in the world. More importantly, the union combines Tandberg's narrow- to mid-bandwidth Vision systems with CBCI's higher end Canvas Visual systems and application-specific products for telemedicine and distance education, resulting in one of the broadest spectrums of single-source videoconferencing products on the market. The merger also combines Tandberg's strong European and Asia-Pacific business with CBCI's growing North American presence.

"The objective of this deal was to create the critical mass needed to compete effectively in this market worldwide," said Marian Levy, vice president of marketing for CBCI and Canvas.

Coming just a month after VTEL completed its acquisition of former competitor Compression Labs, the Tandberg/CBCI merger appears to be another sign that the videoconferencing industry as a whole is still not strong enough to support more than a few major players.

Tandberg is confident that it will now be one of the leading contenders. Sales of its Vision videoconferencing systems and CBCI's Canvas products accounted for 13% of all videoconferencing units shipped in 1996, according to Tandberg, and the goal for 1997 is to significantly increase that number. Some analysts have predicted that the company could overtake VTEL and become number two in the videoconferencing market by summer's end.

Canvas is particularly excited about the merger's potential to expand its healthcare business, according to Richard Grace, director of healthcare solutions.

"In the last couple of months, we have had tremendous success in the high-end area, including some high-end telemedicine projects," he said. "But Tandberg brings a lower bandwidth product line that is very dynamic, and they are the first videoconferencing company to implement the new H.236 algorithm for better low-bandwidth resolution. So we also have a very dynamic low-end product with corresponding price points."

This could lead to new low-bandwidth interactive video applications, he said, such as desktop telepsychiatry.

Tandberg will continue to sell its application-specific productsæsuch as the Canvas Health Care System (HCS) for telemedicineæunder the Canvas name. Vision systems sold for telemedicine and other healthcare applications will also carry the Canvas label.

"We have a certain amount of brand recognition, and we want to continue to leverage what had previously been accomplished with the Canvas name," Levy said.

The company says it has placed nearly 30 HCS systems in the U.S. and Canada, with pending orders for at least 20 more.

Canvas was formed in 1996 when CBCI Telecom acquired all shares of BT Visual Images (BTVI) from British Telecom (BT). BTVI became a wholly owned CBCI subsidiary, while BT became the largest CBCI shareholder. Following the acquisition, CBCI transferred its sales and marketing staff to CVC's Herndon, VA, headquarters and relocated BTVI manufacturing facilities to Montreal. In 1996, Canvas reported U.S. sales of $31 million, with about 18% related to healthcare.