Cisco Looks Beyond Video With Tandberg Buy

"Video is a high-bandwidth application that could drive demand for network upgrades resulting in increased pull-through for demand for switches and routers," explained Choi, highlighting the importance of Cisco's core business.

The Tandberg deal will nonetheless increase the pressure on video rivals Polycom(PLCM) and Radivision(RVSN), whose shares have both taken a hit in the aftermath of the Cisco acquisition.

"This deal suggests Cisco feels it can now attack the balance of the market from a sufficient position of strength," wrote Paul Mansky, an analyst at Canaccord Adams, in a note released Thursday, adding that Chambers is not the only CEO watching video. "The move will put Cisco in more direct competition with similar efforts from Hewlett-Packard(HPQ), Apple(AAPL), Microsoft(MSFT ) and Huawei.

H-P is already daggers drawn with its one-time buddy Cisco after the networking firm's entry into the server space, and also offers its own 'Halo' telepresence and video conferencing products.

As the tech sector slowly emerges from the recession, Cisco is even planning to launch a YouTube-style service for enterprises later this year, in an attempt to tap into the social-networking revolution.

The tech bellwether took a profit hit in its recent fourth-quarter results, but met analysts estimates. The company's first-quarter guidance, however, predicts sales down 15% to 17% on the same period last year, underlining Cisco's desire to breathe new life into its revenue.

Cisco shares dipped 39 cents, or 1.7%, to $22.70 Friday, while the Nasdaq fell 0.02%.

-- Reported by James Rogers in New York

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