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September 23, 2005

VIA EDGAR AND

OVERNIGHT COURIER

Securities
and Exchange Commission

Division
of Corporation Finance

100
F Street, N.E.

Washington,
D.C. 20549

Attn:                    Kathleen Collins

Thomas Ferraro

April Coleman

Re:                             Avistar Communications
Corporation

Form 10-K
for Fiscal Year Ended December 31, 2004

Filed
March 25, 2005

File
No. 000-31121

Dear
Ms. Collins:

On behalf of Avistar Communications Corporation (the
“Company”), we submit this letter in response to the comment letter dated
September 2, 2005 from the staff (the “Staff”) of the Securities and
Exchange Commission (the “Commission”) relating to the above-referenced Annual
Report on Form 10-K (the “Form 10-K”).

In this letter, we have recited the comments from
the Staff in italicized, bold type and have followed the comment with the
Company’s response.  Capitalized terms
used but not defined herein shall have the meanings ascribed thereto in the
Form 10-K.

Form 10-K for the Fiscal Year Ended December 31, 2004

Item 9a.  Controls and
Procedures, page 43

1.                                       We
note your disclosure that “our Chief Executive Officer and our Chief Financial
Officer have concluded that our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15-d-15(e) under the Securities Exchange
Act of 1934 (the Exchange Act)) are effective to ensure that information

required to be disclosed by us in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission
rules and forms.”  Please clarify
whether your officers concluded that your disclosure controls and procedures
are also effective to ensure that the information required to be disclosed by
the Company in reports that it files under the Exchange Act is accumulated and
communicated to your management, including your Chief Executive Officer and
Chief Financial Officer, to allow timely decisions regarding the required
disclosure.  We refer you to Exchange Act
Rule 13a-15(e).  Tell us what
consideration you gave to including this information in your disclosures under
Item 9A.

The Company advises the Staff that the conclusion of
its Chief Executive Officer and Chief Financial Officer regarding the
effectiveness of the Company’s disclosure controls and procedures set forth in
the Form 10-K was based on the complete definition of disclosure controls
and procedures as set forth in Rules 13a-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act).

After the Chief Executive Officer and the Chief
Financial Officer concluded that the Company’s disclosure controls and
procedures were effective to meet all aspects of Rule 13a-15(e), including
the sentence cited by the Staff, the Company presented the conclusions of its
management in Item 9A of the Form 10-K.

The Company will include in its future Exchange Act
filings with the Commission, management’s conclusions regarding the
effectiveness of the Company’s disclosure controls and procedures with specific
references to both sentences of the definition set forth in
Rule 13a-15(e).

Note 2.  Summary of
Significant Accounting Policies

Cash and Cash Equivalents and Short-term Investments, page F-9

2.                                       We
note that you reclassified certain auction rate securities from cash and cash
equivalents to short-term investments in 2003 and it appears that this change
was made in order to comply with existing generally accepted accounting
principles (i.e. SFAS 95).  Tell us
what consideration you gave to disclosing the reasons for this change and the
amounts reclassified in your Consolidated Balance Sheets and Consolidated
Statement of Cash Flows.  In addition,
tell us

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how you considered this change when evaluating the
effectiveness of your disclosure controls and procedures and your disclosures
under Item 308(c) changes in internal controls over financial
reporting.

The Company advises the Staff that it reclassified
certain auction rate securities of $1,000,000 as of December 31, 2003 from
cash and cash equivalents to short-term investments in order to comply with
Statement of Financial Accounting Standards No. 95 (SFAS 95).  This reclassification was disclosed on
page F-9 of the Company’s 2004 Form 10-K.  The reason for the reclassification related
to the distinction between the maturity period until the next auction date when
the auction rate notes are re-priced (which was always less than 90 days) vs.
the underlying original maturity period of the auction rate securities (which
was greater than 90 days).  Per
SFAS 95, cash equivalents should only consist of securities with original
maturities of three months or less.  The
Company believes the error stemmed from the accounting profession reconsidering
its interpretation of SFAS 95, rather than a deficiency in internal
control design or operation.  As such, no
material changes were made to the Company’s controls.

3.                                       Tell
us whether you held investments in auction rate securities in fiscal 2002, and
if so, what consideration you gave to making the same reclassifications in your
2002 cash flow statement.

The Company held $1,300,000 of investments in
auction rate securities as of December 31, 2002.  This amount should have been reclassified
from cash and cash equivalents to short term investments, as was done for the
auction rate securities balance as of December 31, 2003.  The Company respectfully submits that the
subject misstatement was inadvertent, did not impact the reporting of cash
flows from operating activities, nor current assets, the Statement of Cash Flows
involved relates to the oldest year presented, the December 31, 2002
balance sheet was not presented in the 2004 10-K, and for the reasons stated,
is not qualitatively material.  The
Company will consistently present auction rate preferred securities in
short-term investments in future Exchange Act filings, which will have the
effect of increasing fiscal 2003 investing cash outflows and reducing ending
cash and cash equivalents.

Revenue Recognition, page F-11

4.                                       We
note from your revenue recognition policy disclosure that when the Company
provides installation services, the product and installation revenue is
recognized upon completion of the installation process and receipt of customer
confirmation.  Tell us the following as
it relates to your arrangements that include installation of “product”:

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a.                                       Describe
the installation services you provide to customers and the period over which
installation services are provided from the date of shipment of your “product”;

The installation that the Company offers to
customers as a separately-priced service relates to the physical set-up and
configuration of desktop and infrastructure components of the Company’s
solution.  To accomplish this activity,
the Company’s representatives frequently interface with the customer’s internal
Information Technology (I.T.) staff and external suppliers, in order to provide
for connectivity to the customer’s local and wide area networks, and for the
physical placement (arranging for rack space and appropriate environmental
conditions) and connections between the various components purchased.  The effective operation of software and
hardware is checked by the Company’s staff during this installation
process.  Although the “work time” of
this activity at a single location may be only one or two days, the
coordination necessary for accommodating the equipment and establishing
connectivity frequently creates cycle times of between two and six weeks from
product shipment to the customer’s site.

b.                                      How
(if) you have determined the fair value of your installation services;

The fair value of the Company’s installation
services is determined based on the price charged when such services are sold
separately.  In the normal course of the
Company’s business, installation services are sold in conjunction with a
specific product configuration of hardware and software products.  Situations occasionally arise in which
customers contract with the Company to provide installation services without
also purchasing additional Avistar product (e.g. if a customer redeploys
previously installed product to another location).  The price for installation services is fixed,
specific to each of the Company’s products, and published to its customers via
the Company’s standard price book.

c.                                       When
you refer to “products” are you referring to more than one product or
service?  If so, tell us the nature of
the arrangements that include these multiple elements, how you recognize
revenue and determine fair value for each element and the authoritative
accounting literature you apply in accounting for these arrangements;

When the Company refers to “products”, it is
referring to a set of desktop (endpoint) products (hardware and software) and
infrastructure products (hardware and software) that combine to form an Avistar
video-enabled collaboration solution.
The arrangements that include these multiple elements may include these
software and hardware products, as well as installation services, post-contract
customer support and training.  Pursuant
to SOP 97-2, when

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an arrangement includes multiple elements,
the Company recognizes revenue when all of the following criteria are met:

•                  Persuasive evidence of an arrangement exists.

•                  Delivery has occurred.

•                  The fee is fixed or determinable.

•                  Collectibility is probable.

If there are any undelivered elements, the Company
defers revenue for those elements, as long as VSOE exists for the undelivered
elements.  Additionally, when the Company
provides installation services, the product and installation revenue is
recognized upon completion of the installation process and receipt of customer
confirmation, subject to the satisfaction of the revenue recognition criteria
stated above.  Although the Company’s
contractual sales documents specify that payment terms for its products are
based on the shipment date of the product, experience demonstrates that payment
is delayed, and collection is not probable, until the customer acknowledges
installation has occurred.  The deferral
of product revenue recognition until installation is performed is supported by
paragraph 14 of SOP 97-2.

d.                                      Explain
what you mean by “customer confirmation” and whether uncertainty exists about
receiving “customer confirmation”.

Also, tell us how
you have considered disclosing this information in your revenue recognition
policy.

Customer confirmation is obtained and documented by
means of a standard form indicating the installation services provided and the
hardware and software components installed by Avistar for the customer.  Each customer confirmation is signed by both
the supervising Avistar Project Manager and the supervising customer contact
responsible for the installation once the installation services are
completed.  The customer confirmation is
then forwarded to the Avistar Finance Department for review prior to
recognizing revenue.  The Company’s
operating history evidences that no uncertainty exists regarding the receipt of
customer confirmation once the installation services have been performed.

In its future Exchange Act filings, the Company will
expand its revenue recognition disclosures to include the information provided
above.

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Note 8.  Legal Proceedings,
page F-21

5.                                       We
note your disclosures regarding the 2002 settlement of your patent infringement
suit against Polycom, Inc.  Clarify
for us the following relating to the Settlement Agreement and Patent
Cross-License Agreement:

a.                                       The
amount of total cash proceeds received from Polycom (i.e. $27.5 million or
$21.1 million);

Polycom, Inc., as part of the Settlement and
Cross-Licensing Agreement, made a one time payment to the Company of $27.5
million.

b.                                      How
you accounted for the $6.4 million of legal expenses;

A portion of the Company’s legal fees was negotiated
with its litigation counsel, Simpson Thacher & Bartlett LLP, as being
contingent and payable only in the event of a favorable outcome from the
Company’s litigation with Polycom.  The Company
concluded, based on EITF Issue No. 99-19 (Reporting
Revenue Gross as a Principal versus Net as an Agent), that the
revenue from the Settlement and Cross-Licensing agreement should be reduced by
the $6.4 million contingent legal fees, since the Company did not assume any
risk associated with those fees.  The
Company recorded the net proceeds of $21.1 million as deferred revenue.

The Company also considered the guidance in
EITF 01-14 (Income Statement
Characterization of Reimbursements Received for “Out-of-Pocket” Expenses
Incurred).  The EITF reached a
consensus in EITF 01-14 that reimbursements received for out-of-pocket expenses
incurred should be characterized as revenue in the income statement.  However, EITF 01-14 assumes that the criteria
for gross revenue recognition in EITF 99-19 is met. The Company does not
believe the criteria under EITF 99-19 have been met due to the fact that the
Company did not have the “risks and rewards” with regards to the contingent
legal fees. The Company further believes that EITF 01-14 specifically relates
to entities that provide services as part of their central ongoing operations
and incur incidental expenses, such as airfare, mileage, hotel stays,
photocopies, etc.  The EITF does not
address reimbursed legal fees which are clearly more than incidental.  In this case, Polycom reimbursed the Company
for a portion of its legal fees, as was stated in the settlement agreement
(Article IV, section 4.1) filed as an exhibit to the Company’s 10K.
This reimbursement was not part of the services
provided by Avistar and was not part of the actual product delivered (the license of the technology).  As such, it appeared inappropriate to
gross-up revenue for amounts paid for non-revenue related items.

c.                                       Explain
why all the proceeds from the settlement were recorded as prepaid license fees
under the Cross-License Agreement.  In
this regard

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tell us why no value was assigned to the
settlement of claims against Polycom;

Although the Staff’s question references the
proceeds as having been recorded as prepaid license fees, in fact, the $21.1
million received was accounted for as deferred revenue, to be recognized
ratably over the five-year capture period stipulated in the Cross-Licensing
Agreement.  The Settlement Agreement
filed as an exhibit to the Form 10-K explicitly states that Polycom denied
past infringement of the patents asserted in the litigation and the entry into
the Settlement Agreement did not constitute an admission of liability or
validity of the Avistar claims (Section 3.2).  Therefore, no basis existed for assigning
value to the infringement claims against Polycom.  Polycom had dismissed its counterclaims
against the Company prior to the execution of the Settlement and
Cross-Licensing Agreements.  Accordingly,
no value was allocated to the release of Polycom claims against the
Company.  See (d) below for
information on why no value was assigned to the Polycom intellectual property
licensed to the Company.  Therefore, after
reimbursement of legal fees, the Company allocated the remaining proceeds from
Polycom to the Cross-Licensing Agreement.
During the five-year capture period defined in the Cross-Licensing
Agreement, Polycom receives the rights to the Company’s entire existing patent
portfolio includ