Videoconferencing company Polycom Inc will buy Hewlett Packard Co's videoconferencing business for $89 million in cash, as it arms itself in its fight for market share against Cisco Systems.
In recent quarters, Polycom has collaborated with companies like Microsoft and IBM to offer products that fuse video and voice better and gain ground against Cisco.
But Microsoft's recent $8.5 billion acquisition of Skype is likely to boost videoconferencing from workers' desktops, posing further risks to companies like Polycom and Logitech.
The deal with HP will allow Polycom to expand its services into the high-growth desktop and mobile video conferencing market, helping it balance its traditionally dedicated terminal heavy business.
Under the agreement, HP will host Polycom's video applications on its mobile operating system, webOS, and also resell Polycom's products through its salesforce.
"One thing in common that HP and Polycom have is a competitor, which is Cisco Systems," Polycom CEO Andy Miller told Reuters.
Miller said he did not see Microsoft's Skype buy as a threat because it was focused on consumer markets while Polycom gets most of its business from large companies.
The acquisition of HP's videoconferencing unit will bring Polycom HP's telepresence system Halo, which was originally designed in partnership with Dreamworks Animation Skg Inc.
Polycom has been looking to target smaller businesses and consumers with its videoconferencing applications for mobile devices and plans of a home telepresence system.
A telepresence system is a made up of a suite of applications and products that make videoconferencing more real life.
The acquisition, which is expected to close in the third quarter, will add slightly to earnings, Polycom said in a statement.
Separately, the company said its board approved a two-for-one split of its common stock to be effected in the form of a stock dividend.
"We are hoping to attract more retail customers through this stock split," Miller said.
A stock split divides existing shares into multiple shares, making them more affordable for investors.
Shares of Polycom, which were trading at $57.69 on Nasdaq, have gained 14 percent since the Pleasanton, California-based company reported first-quarter results on April 21.