NEW YORK (Reuters) - Private equity firm Apax Partners APAX.UL is no longer in talks to buy U.S. videoconferencing company Polycom Inc (PLCM.O), a source with knowledge of the matter told Reuters on Tuesday.
Shares of Polycom fell nearly 7 percent on the news, erasing gains made last week, when the Financial Times reported that Apax had been in talks since November to take Polycom private for more than $3 billion.
The two companies held discussions, but Apax did not make an offer, said the source, who declined to be identified because the talks were confidential.
Spokesmen from Apax and Polycom declined to comment.
While it was not clear why the talks had broken off, the recent rise in Polycom shares would have made it a much more expensive company for Apax to buy outright. Last week, the stock briefly rose to a high of $34.14 -- up around 60 percent from its low point in November 2009.
The videoconferencing sector has experienced a flurry of acquisitions and is seen as a key growth area as companies seek to cut travel costs and innovate by installing, for example, remote customer service stations.
Giant networking company Cisco Systems Inc (CSCO.O) is set to acquire Polycom"s Norwegian rival, Tandberg ASA (TAA.OL) and become the world"s largest videoconferencing company.
On a smaller scale, Logitech International SA (LOGN.VX) has acquired privately held video conferencing company LifeSize Communications.
Analysts say Polycom may still look attractive to other potential buyers, like private equity firm Silver Lake Partners or companies including Alcatel-Lucent (ALUA.PA), Hewlett-Packard Co (HPQ.N) and International Business Machines Corp (IBM.N).
Polycom, for its part, is focusing on expanding partnerships to fight off the Cisco-Tandberg behemoth. It has a strategic partnership with HP, under which HP will help resell Polycom products, expanding their sales reach.
The deal also works for HP, as it allows it to offer customers a diverse menu of products and services. HP also competes with Cisco.
Apax"s technology and telecommunications investments include Kabel Deutschland KABLD.UL, NXP Semiconductors, TDC A/S (TDC.CO) and Versatel Deutschland, according to its website.
(Reporting by Ritsuko Ando, additional reporting by S. John Tilak in Bangalore; editing by Gerald E. McCormick and Andre Grenon)
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