The Wainhouse Research Bulletin

ONLINE NEWS AND VIEWS ON VISUAL COLLABORATION AND RICH MEDIA COMMUNICATIONS Not much product news this week, but we are expecting some dramatic announcements later this month from one big player in the videoconferencing product space and another in the audio/web services space. Stay tuned. As always, please feel free to forward this newsletter to your colleagues. SUBSCRIBE NOW! IT’S FREE! To be added to our automated email distribution list, simply visit www.wainhouse.com/bulletin. Andrew W. Davis, [email protected]

Wire One Set to Unload its Videoconferencing Equipment Division Wire One has entered into a definitive agreement to sell its videoconferencing reseller business to Gores Technology Group, the same company that bought a similar operation from Forgent six months ago. The transaction is valued a $23 to $25 million, including $22 million in much-needed cash. The sale price represents about 1/3 the revenue level of this operation. The Wire One operation includes equipment distribution, system design and engineering, installation, operation, and maintenance activities. Our understanding is that this business will continue to do business under the Wire One moniker, but be wholly owned by Gores, a private company. Remaining as a publicly held company and lead by Rich Reiss (see interview at end of this newsletter) will be a newly named company, almost certain to have the word Glowpoint in its name, that will focus exclusively on IP video network services. Here’s What I Think. You don’t have to be a genius to see that in tough times companies have to stick to their knitting, focus on their core competencies, etc. Yes, the pendulum is in full swing, and diversification is definitely out these days. Expect to see more of this in the conferencing and collaboration world over the next 12 months. Palm to Merge with While this isn’t technically a conferencing and collaboration story, the handheld PDA market is of interest to all of us in the conferencing industry because of its potential impact on future user interfaces, the meshing with mobile solutions, etc. I found the announcement of the Palm/Handspring marriage of interest from a business history point of view. Here is my “pictoral” of the corporate history.

Palm USR 3COM 1992 1995 1997

PalmSource 2003 PALM 2000 Handspring Palm 1998 2003

The Wainhouse Research Bulletin Page-1 Vol. 4 #24, June 16, 2003 It’s another story of coming full circle. Palm was swallowed by USR, which was later swallowed up by 3COM. The management team left to form Handspring; 3COM later spun out Palm in a “return to core competency” thrust; and now Palm and Handspring are coming together again in an effort to fight off the PocketPC industry led by the evil empire in Redmond. 8x8 (remember them?) Intros New Videophone 8x8 has announced the production and general availability of the world’s first SIP videophone. 8x8’s DV325 Desktop Videophone works in conjunction with the company’s Packet8 voice and video service and enables plug-and-play high-speed, instant-on video dial tone service over any broadband internet connection (cable modem and DSL included). Like the company’s POTS videophone, the DV325 is an all-in-one desktop videophone system that includes an integrated camera and an LCD display. The DV325 is compatible with other SIP voice and video solutions, including ’s Windows Messenger. The DV325, $599, supports up to two external cameras and one external video display and features 10 speed- dial numbers and an integrated address book. The videophone, in conjunction with the Packet8 service from 8x8, enables users to make voice and video calls to IP endpoints and regular telephones anywhere in the world. Launched in November 2002, the Packet8 service enables anyone with high-speed internet access to sign up for telephone service at www.packet8.net. My Comments First of all, at $599 for a videophone, we are getting to the point where this market should be set to take off, finally. In the “old days,” videophones worked on POTS or ISDN, two networks that didn’t make sense for a variety of reasons, no matter whether you were a consumer or an enterprise. IP solves many of these issues. The Wainhouse Research Bulletin would like The Packet8 service, like those you to join us in thanking our 2003 sponsors available from Vonage and others, who help keep distribution of the WRB free: gives you an insight into the future of Aethra Polycom IP enhanced telephony. There are so many features available with IP AT&T Conferencing telephone services that it makes your ClearOne ReView Video head spin (and also highlights the lack Compunetix Ridgeway of innovation in the wired, PSTN First Virtual Corp Scotty world over the past few decades). Forgent Networks Sonexis However, your telephone service is only as good as your network service. InterCall Sony My cable modem reboots itself from IVCi Spectel time to time, and I know my cable Konftel TANDBERG modem service (I have two of them) MVC V-SPAN can’t go 24 hours without an outage, even if the outage is brief. So, I The fine print: Sponsorship of the WR Bulletin in no way implies that our sponsors endorse the opinions expressed in wouldn’t want to run my business with the WRB. Nor does it imply that the Bulletin endorses their an IP telephony service, not yet. But products or services. We remain an equal opportunity critic. wait till next year….. The Wainhouse Research Bulletin Page-2 Vol. 4 #24, June 16, 2003

Issue #2 of our new monthly e-zine covering all aspects of electronic conferencing and collaboration should be out by June 17. Download your copy at wainhouse.com/cb News in Brief ¾ IBM Lotus is renaming its Sametime product. The new name, which conveys instant recognition of functionality, but doesn’t exactly fit into small spaces, is “IBM Lotus Instant Messaging” and “IBM Lotus Web Conferencing,” although the two are currently bundled together. On-premise pricing (CPE) for Lotus Instant Messaging and Web Conferencing is $48 per registered user and includes first year maintenance. Maintenance after the first year is $12. The software is also available on a hosted basis from IBM, but the license is then based on a concurrent user (typically $70-80 per user per month). The hosted web conferencing does not include audio or video. We envision a big battle shaping up between IBM Lotus and Microsoft (with Greenwich) in this enterprise instant messaging and web conferencing space. How these two will do battle, and who will be caught in the crossfire, promises to be a story worth following over the next 24 months. ' WR Forum: Lotus (IBM) Sametime ¾ ViewCentral Inc. has announced the addition of audio conferencing capabilities to the company’s vConference and vClassroom applications (sold to users, not service providers). With this integration, customers will be able to use ViewCentral to manage the processes surrounding reserved audio-only conferences in addition to managing web conferencing processes. ViewCentral Conference Management Solutions (CMS) automate the scheduling, registration, payment, marketing, surveying, reporting and follow-up for in-person and virtual collaborative events such as earnings announcements, press conferences, and sales meetings. ViewCentral CMS is tightly integrated with the PlaceWare and WebEx web conferencing platforms, and with the NEW Report from Wainhouse Research new release, the company adds integration with MCI audio Comparing IP Video Network Service conference calling. Other audio Providers vs. the Naked Internet conferencing providers will be For organizations consider- announced soon. Event administrators ing IP-based videoconfer- doing pre-planned and large events encing, this report provides the background information can now coordinate the before and needed to select an IP video after processes surrounding in-person, network provider. Nine IP reserved audio-only or audio/web video network service pro- conferences through a single viders are covered including each vendor's corporate application with the flexibility of strategy and unique approach choosing the audio and Web confer- to the market. Each vendor's encing provider they prefer to use. network characteristics and ancillary services are ex- ¾ Virtela Communications is now plained in detail. delivering its IP virtual private The report includes detailed pricing data to compare the network (VPN) services via global entry, mid, and unlimited service plans from each supplier. DSL connectivity through relation- The 107-page report is available for $695 in hardcopy and ships with more than 150 access $995 in electronic (pdf) form. For full details and a free providers in 75 countries. executive summary see www.wainhouse.com/reports

The Wainhouse Research Bulletin Page-3 Vol. 4 #24, June 16, 2003 ¾ Masergy Communications has teamed up separately with Expedite Video Conferencing Services and Crowner Technologies, Inc. to offer complete videoconferencing solutions with IP video network services. ¾ MCI is expanding capacity for its reservationless audio conferencing service with additional bridging hardware from Voyant. Summit Update: Seats are selling fast, and capacity is limited. This event promises to be THE conferencing and collaboration event for 2003. Register on-line. This year’s presentations cover audio, video, and web conferencing futures, as well as issues facing service providers and resellers alike. Highlights include four great interactive panel discussions that promise to shed heat and light on issues facing vendors, channel partners, service providers and end users alike.

July 23-24, 2003 Colonnade Hotel, Boston, MA www.wainhouse.com/summit

July 23 July 24

y Welcome: Andrew Davis/WR y Welcome: Andrew Davis/WR y State of the Conferencing Market: Audio, Video, Web, & y Issues facing VARs and Service Providers: IM. What are the challenges ahead? Andrew Davis/WR Brent Kelly/WR y The Innovator’s Dilemma: One ex-insider's perspective y Where and/or What is the "Value" in a VAR? An end on the future of conferencing: Rich Baker, Glance user's perspective: Cathy Boswick/ADP Networks y Do we have distribution and channel strategies to take y Maximizing today's capabilities – What is the role of us to the next level, or are we just redefining channel video in the collaboration future? What does seamless conflict? Kirk Muffley/Whitlock Group mean, and does anybody really want full integration: y Issues facing channel partners. A totally schizophrenic Ed Ellet/Polycom and marginally psychopathic view from both sides of y Can the conferencing market really take off without a the fence. J.D. Vaughn/AGT viable desktop solution? Is web conferencing the real y Panel Discussion: Surviving in the channel: Brent future of desktop collaboration? Bob Romano/FVC Kelly/WR; Richard Norris/Mars; Jay Myers/Interactive y The Evolution of Conferencing in the Enterprise: Solutions; JD Vaughn/AGT; Kirk Muffley/Whitlock; Gary Foley/Xerox Giles Adams/NIAD y Microsoft & the Real Time Collaboration Future: y Panel Discussion: Users, providers and equipment Dustin Grosse/Microsoft. manufactures explore what users want, whether IP is a threat or an opportunity, and what the future holds for y Network Management and Scheduling: experiences from voice, video and web services: Marc Beattie/WR; the field. Do we need it, and how do we want it? Gary Foley/Xerox; Cathy Boswick/ADP; Mike Pihlman/LBNL-Esnet Chris Bottger/IVCi; Jerry Pompa/Compunetix; y Is H.264 the next great wave for video. What are the Mike Brandofino/Wire One implications? Matt Soga/Sony y Panel Discussion:CEO perspectives on the future of rich y Achieving the benefits of web conferencing by driving media conferencing, networks, integration strategies, adoption in the enterprise: Lane Parker/Seagate and next generation customer needs: Andrew Davis/WR; Bob Hagerty/Polycom; y Wall Street’s view of the industry: Jason Ader/Thomas Gadi Tamari/RADVISION; Andrew Miller/ Weisel & Phil Leigh/Raymond James TANDBERG; Subrah Iyar/ WebEx y PANEL DISCUSSION: Microsoft and Conferencing y Adjourn Can any of today’s conferencing vendors and service providers survive if Microsoft gets serious about real time conferencing and collaboration? : Andy Nilssen/WR; Praful Shah/WebEx; Dustin Grosse/Microsoft; Jeff Flowers/Sonexis; David Seavers/Spectel; Phil Keenan/Polycom

The Wainhouse Research Bulletin Page-4 Vol. 4 #24, June 16, 2003 SpotLights: FREE Webinar – June 19 Our June SpotLights will be on Comparing IP Video Network Service Providers, presented by WR Sr Analyst and Consultant Dr. Brent Kelly. This web conference will discuss the different options organizations have when considering video over the IP wide area network, and it will discuss mechanisms the various IP video network service providers use to enable quality of service. It will also discuss important issues when selecting an IP video network service provider including geographical reach, cloud-based services, and other ancillary services that can make or break a successful IP video communications implementation. Registration is free but limited to the first 150 individuals. To register visit WR SpotLights Registration. Whether or not you are currently using IP video network services, this Spotlight session will be an excellent opportunity to learn what is new and available This SpotLights event is sponsored by InterCall, a provider of reliable and cost-effective audio, web and video conferencing solutions. We will host the web conference using InterCall’s Mshow product. Date: June 19, 2003 Time: 11:00 a.m. EDT Registration site: WR SpotLights Registration People & Places TANDBERG, Toni Lee Rudnicki, Chief Marketing Officer (CMO). One on One with Wire One’s Rich Reiss WRB: Why did you sell off the videoconferencing equipment division? After all, this business did account for 90% of your revenues. RR: By separating the two divisions, we are able to unlock the value of each one. The equipment division will continue on under the Wire One name, but be wholly owned by Gores Technology. Leo Flotron will continue to run that operation, and Gores will focus on the integration part of the business. I think this type of business can actually be more competitive when it is run as a private company without the pressures of Wall Street. For the as yet un-named new company that I will lead and that will continue on as a public company, we will be focused exclusively on Glowpoint, and delivering next-generation video communications services to customers. This deal gives us the cash and the focus to really push ahead in this area. And equally important, it removes a competitive obstacle that prevented other video equipment resellers from reselling Glowpoint services. Now that we don’t compete with other resellers, we expect more of them to be interested in offering their customers Glowpoint. So we benefit by having more sales talent at our disposal. WRB: After this deal is done, you will be running at a $10-15 million annual revenue run rate. Isn’t this kind of small to be a publicly listed company? RR: With growth in the neighborhood 20% for the last 6 quarters for the Glowpoint business, it will be one of the only companies on NASDAQ that has shown a consistent The Wainhouse Research Bulletin Page-5 Vol. 4 #24, June 16, 2003 steady growth. I think that focus on only top line revenue has gotten many companies in trouble. Investors are looking for sound, well managed companies with a clear plan for growth and profitability. There are a lot of public companies started small – like AT&T and AOL to name a couple.

WRB: How does this deal with Gores affect the current Glowpoint customers? Sept. 10, 2003 – Washington, DC Oct. 2, 2003 – San Francisco RR: It doesn’t really, other than over time we expect Oct. 15, 2003 – New York to be able to deliver more features, functions, and Oct. 22, 2003 – Chicago services over Glowpoint. www.conferencing4business.com WRB: How does it affect new customers? Sponsored by AT&T, Cisco, Sonexis, TANDBERG, WebEx RR: Customers in the video community will be able to access Glowpoint services through their existing reseller relationships, something most have not been able to do in the past. This will provide a higher level of service since customers can have a tight relationship with their VAR and at the same time enjoy closer support from Glowpoint than the support available through an ISDN provider We also believe that customers or users of a network benefit when the service itself gains scale. This is really Metcalfe’s Law, which you know all about. So, both new and existing customers of our video service benefit as the number of endpoints on Glowpoint expands. That’s what this deal is all about. WRB: Well, you are now a pure-play IP video company. Doesn’t that leave you very exposed? Why won’t one of the carriers wake up one day and decide you were right, IP video is important, and then crush you like an insignificant bug? RR: You mentioned earlier that we will be in the $10-15 million range for this year. That is not a revenue model that is attractive to the major carriers at this time. Let’s face it, Andrew, radically different services that change markets are generally started by entrepreneurs and most innovation in telecom has come from startups like Glowpoint. UUNet and MFS weren’t started by MCI and McCaw Cellular wasn’t started by AT&T. Most carriers are also in a mode of trying to leverage existing infrastructure and have little or no budget for new ventures. We believe that an independent Glowpoint will accelerate our ability to sign up resellers and gain market share. When the carriers do “wake up” as you say, if we’ve done our job well, we won’t be competing with them, we’ll be partnering with them.

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The Wainhouse Research Bulletin Page-6 Vol. 4 #24, June 16, 2003