Ericsson buys Vonage in a $ 6.2 billion deal
Network equipment and services provider Ericsson will acquire the enterprise cloud services company Vonage in a $ 6.2 billion deal that it claims is fundamental to creating a cloud-centric platform based on “open Innovation “and the opportunity for its customers to monetize 5G in the company.
Ericsson said the purchase “underscores” [its] Strategy to expand its presence in the wireless enterprise space and expand its global offering. ”The acquisition is Ericsson’s largest to date and is expected to close in the first half of 2022.
The network equipment company said in a press release that Vonage’s “robust performance and growth prospects” are based on its Vonage Communications Platform (VCP). Ericsson found that VCP generates approximately 80% of Vonage’s total revenue and serves more than one million registered developers worldwide who develop apps for approximately 120,000 business customers.
“Imagine putting the power of 5G – a massive, global innovation platform – at the fingertips of developers and then supporting it with Vonage’s advanced communications services in a world of 8 billion connected devices,” said Ericsson President and CEO Börje Ekholm in a video that was posted on his Twitter account. “With this announcement we are making this goal possible today.”
He added, “The digitization of business and the demand for connected applications, especially video, is growing exponentially. It will remain so for the foreseeable future, which is a great opportunity for Ericsson, for our customers, for businesses and ultimately for end users. ”
Ericsson CFO Carl Mellander told Reuters that Vonage is “complementary to what we’ve built in the corporate space,” while referring to Ericsson’s $ 1.2 billion acquisition of Cradlepoint last year.
Ekholm told that Financial Times that in the midst of large investments in 5G networks by telecommunications companies, “We want to improve the monetization ability. Network operators won’t build 5G unless they can monetize it, ”he said.
Ericsson said in a press release that the transaction builds on its stated intention to expand in the wireless sector worldwide and “[offer] Existing customers have a higher share “in the corporate market, which is seen as the key to 5G success. But it also puts the company in the potentially delicate position of being a service provider itself, as Vonage offers services like Voice over IP and Unified Communications.
Dean Bubley, Founder of Disruptive Analysis, said in a LinkedIn post on the transaction: “I think this acquisition has very little to do with # 5G – it is more about increasing Ericsson’s involvement in companies without over-scare his telecommunications customers (whom Vonage competes with in many areas).”
In positioning the transaction, Ericsson praised Vonage’s Communication Platform as a Service (CPaaS) as a complementary and high-growth area that will interlock with and ultimately help drive corporate 5G applications and ecosystems. “As investments in 4G and 5G have increased – and a thriving ecosystem of new applications and use cases harnessing the power of modern networks – business demand for programmable networks has accelerated,” Ericsson said in explain the acquisition. “In addition, Ericsson’s global leadership in 5G technology is expected to provide access to open network API development space that is expected to reach at least $ 8 billion by the end of the decade with a strong growth profile. … The combination of Vonage’s customer base and developer community and Ericsson’s extensive network expertise … creates opportunities to accelerate independent strategies and innovations in the marketplace. These include accelerating the digitization of businesses and developing advanced APIs made possible by 5G; Put wireless network performance and communications at the developer’s fingertips. Such APIs can be used to ensure the quality of critical services such as telemedicine, immersive virtual education and autonomous vehicles, as well as experiential performance benefits in gaming, augmented and extended reality over wireless. “
Longer term, Ericsson said it “intends to add value to the entire ecosystem – telecom operators, developers and businesses – by creating a global platform for open network innovation that builds on complementary solutions from Ericsson and Vonage.”
According to Vonage’s latest quarterly results released in the first week of November, VCP’s third-quarter revenue increased 25% year over year to $ 274 million. The company’s API sales increased 43% quarterly to $ 155 million. Vonage CEO Rory Read highlighted three new products launched during the quarter: a new AI, a virtual conversational self-service assistant for unified communications, a new tool that enables web developers to use the Vonage’s API for video calls with multiple participants easy to integrate, and a remote call centralized solution.
“We will see … a multimodal communications transformation in every industry, workflow, region, customer size,” Read said during Vonage’s interview with investors in the third quarter, adding that Vonage expects a transition in API interactions, for the most part “Transactional” are notifications “up to” 360-degree engagements ” [and] full conversations ”as more consumers and businesses move to digitized engagement, made possible in part by 5G and billions of smartphones and devices.
“What is happening now is the convergence of the Internet, mobility, cloud and [a] powerful 5G network that is shaping the digital transformation and the intelligent communication wave and driving sustainable change in the way companies operate, ”Read told investors when the company called Transcript provided by Seeking Alpha. “Customers expect to interact digitally with companies to get the information they want and the channel they choose from anywhere. Likewise, employees expect seamless collaboration, engagement, and access to technology no matter where, when or how they work. ”To achieve this level of engagement, Read believes that“ all modes of communication ”through the kind of APIs and functionality that Vonage via its VCP, will be embedded in apps, workflows and customer experiences.