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Say “WiFi telephony” and the company SpectraLink pops into your head. Say “IP and conference phones” and Polycom comes to mind. Put them together, and you have a killer combination of technologies and markets.

Indeed, on February 7, 2007, Polycom, Inc. (Nasdaq: PLCM), the world’s leading provider of unified collaborative communications solutions, and SpectraLink Corp. (Nasdaq: SLNK), the leader in workplace wireless telephony, announced that they have signed a definitive agreement under which Polycom will acquire SpectraLink for $220 million in cash. (Polycom will commence a cash tender offer to purchase all of the outstanding shares of SpectraLink for $11.75 per share, an enterprise value of approximately $220 million, which is net of existing cash and debt.) By combining with SpectraLink, Polycom immediately becomes a major player in both the wired and wireless IP phone markets and can leverage the market and technology advantages from a combined product portfolio. Both companies do business in many non-overlapping markets, so each organization complements the other.

Jim Kruger, VP Marketing at Polycom, says, “We’re all very excited about this. Both companies have been in discussions for about couple of months now. From Polycom’s perspective, it really makes strategic sense for us because while we have leadership in SIP market on both the desktop IP phone as well as the conference phone, it’s more on the wired side, not wireless. We’re getting a lot of pull from our customers and the markets that we play in, in terms of the hosted markets, with BroadSoft (News - Alert), Sylantro and others, as well as service providers and the IP PBX market and our partners there, such as Interactive Intelligence, Sphere, ADTRAN (News - Alert) and Digium. Our customers were really wanting to deal with a one-stop shop, and they’ve been constantly asking us to sell them wireless technology. So it was really the demands of our customers that spurred our discussions with SpectraLink.”

“We found that there were a lot of synergies between both Polycom and SpectraLink,” says Kruger, “particularly in terms of overall strategy and the way we approach the market as independent endpoint providers — neither of us have call control solutions, because we go to market with partners. Both companies have some similar partners, but there are also many areas into which SpectraLink sells but Polycom doesn’t and vice versa. For example, Polycom sells into the hosted and IP PBX market, unlike SpectraLink.”

“Through our discussions,” says Kruger, “we came to the conclusion that there was a significant opportunity for both companies to join forces, and go to market with both a market-leading, wired desktop IP phone as well as a wireless phone. So that’s basically the story of how we got to this deal today. The semantics of the deal are that Polycom paid cash, $220 million of it. It’s a tender offer, so we expect that the actual close of the acquisition shall happen in the second quarter timeframe. It could come earlier than that, but the current estimate is that we’ll fully settle things at some point in April 2007.”

A Long “Engagement”

Ben Guderian, VP of marketing at SpectraLink, says, “This deal probably makes a lot of sense in the context of our initiatives to pursue the SMB [Small and Medium-sized Business] market and particularly our interest in providing a SIP handset that’s priced favorably, based on what we’ve done with our recent NetLink 8000 Series that allowed us to do some ‘price peering’ for going after the SMB market and now also the hosted IP telephony market. We actually had Polycom ‘in our sights’ for a long time. We really wanted them as a partner in one form or another, whether it was just through distribution, an OEM arrangement, or a ‘marriage’. Now that we’re together we can go after the SMB market much faster than we could have done on our own.”

Kruger adds: “The plan is that SpectraLink will now report to Sunil K. Bhalla, Polycom’s Senior VP and General Manager, Voice Communications Division. We expect SpectraLink to be pretty much a separate operating division under Bhalla, obviously taking advantage of all the synergies between the two companies. From a brand perspective, we fully plan on leveraging both the SpectraLink and European KIRK brands [SpectraLink acquired KIRK Telecom, a Denmark-based, global provider of on-site, wireless communications solutions, in December 2005 for approximately US$62.0 million]. Our current intention is to keep the SpectraLink brands around and leverage them. Adding the Polycom brand awareness behind all of that will provide a great boost in market and broaden interest in SpectraLink devices.”

“We’ve got to take this one step at a time,” admits Kruger. “It’s still pretty early on; we have a couple months to go before the acquisition actually closes, so we’ll be doing a lot of planning during that timeframe.”

Dual and Triple Band Phones?

Will this cosmic marriage of Polycom and SpectraLink accelerate the development of dual and triple-band phones?

SpectraLink’s Guderian says, “We at SpectraLink will stay focused on the same markets that have gotten us to where we are today. I agree that there are a lot of interesting synergies as we continue to move forward on such things as dual-band phones. Obviously, we’re making a major play in SIP-enabled technology through this whole thing too. There are also some interesting things about this deal that relate to our softphone initiative and how we can leverage that on both wired and wireless phones. So, there’s nothing about this deal that will hold back any of SpectraLink’s current initiatives. Indeed, it’s a much better situation for us now, as we have these synergies that we can pull together, and having the same channel opportunities. Without making any commitments, I think there are still many interesting things we can do on the handset side as wireless and IP Communications continue to move forward and evolve.”

Marketing and Sales

Kruger says, “Both companies’ marking and sales will be combined into the Polycom Voice Division. However, a separate focus for SpectraLink will still exist. Pretty much all of SpectraLink’s marketing team will remain intact and they’ll continue to focus on their specific products. Again, we’ll look at the synergies among us and we’ll be sure to leverage SpectraLink technology by bringing their wireless concepts into what Polycom is doing, and we’ll make sure that Polycom’s wired technology is integrated into what SpectraLink is doing. Pretty much the same thing will happen from a sales perspective. We’ll still have a few people dedicated to some specific accounts, but there will be integration, and, over time, who knows what will happen? But we definitely want to keep the separate focus on the specific markets that our customers are in, then really find the synergies between the two, and then augment the offerings appropriately.”

“As it is, I just talked to our lead salespeople on the Polycom side and they’re so thrilled about this deal that they’re just jumping out of their shoes,” says Kruger. “They’re super-excited about the whole thing.”

Says SpectraLink’s Gurdurian, “SpectrLink has not been a name synonymous with SIP, but we’ve been doing a lot of things to deal with that. But this deal is where we can see some immediate synergies in terms of just how people will have a lot more confidence in what we’re doing as we go extending our influence into the call servers that look for and deal with SIP endpoints, wired and wireless. Now they’ve got the whole thing and we’ll also be dealing with the hosted IP guys, where we really had no play at all prior to this deal. So, our brand and association with WiFi telephony certainly still carries over into the large enterprise and with the verticals, but we can certainly leverage the Polycom brand and their reputation for open SIP support will go a long way when selling in various markets.”

At the moment of the announcement, Sunil Bhalla, senior VP and general manager of Polycom’s Voice Division, said: “Voice over WiFi is a high growth market, and Wireless IP telephony is emerging as one of the fastest-growing segments in the IT segment. We believe integrating SpectraLink into Polycom will yield multiple immediate synergies: One, rapidly extending Polycom’s interoperability with the enterprise SIP telephony leaders to the SpectraLink wireless handset solutions; two, leveraging SpectraLink’s strength with key vertical markets such as retail, hospitality, and healthcare into Polycom’s core voice and video offerings; three, strengthening our mutual strategic partner relationships such as Avaya (News - Alert), Alcatel, Cisco, and Nortel, and creating new opportunities for SpectraLink with Microsoft, IBM, and others, and four, utilizing Polycom’s global channel network and high-touch sales force to sell SpectraLink mobility solutions to a broader customer set. All of these synergies deliver the opportunity for the combined company to deliver compelling fixed and mobile solutions which we believe will drive growth at both the top and bottom line.”

The potent amalgam of Polycom and SpectraLink should give a shudder or two to competitors such as Cisco. Time will tell what kinds of interesting products emerge from this union.

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Richard Grigonis is an internationally-known technology editor and writer. Prior to joining TMC (News - Alert), he was the Editor-in-Chief of VON Magazine from its founding in 2003 to August 2006. He also served as the Chief Technical Editor of CMP Media’s Computer Telephony magazine (later called Communications Convergence (News - Alert)) from its first year of operation in 1994 until 2003. In addition, he has written five books on computers and telecom (including the Computer Telephony Encyclopedia and Dictionary of IP Communications). To see more of his articles, please visit his columnist page.