Vonage shares touched high in many weeks since the announcement of Ericsson takeover on Monday. This USD 6.2 billion deal came months after its activist investor, Jana Partners, had asked Vonage Holdings Inc. to hire advisers to explore strategic alternatives, including the possibility of a sale.
Rory Read – CEO of Vonage said, “We believe joining Ericsson is in the best interests of our shareholders and is a testament to Vonage’s leadership position in business cloud communications, our innovative product portfolio, and outstanding team.” Legion Partners Asset Management LLC, a long-term stockholder of Vonage Holdings Corp agreed. According to their statement, “Legion Partners strongly supports Vonage’s decision to enter into this transaction, which we believe is an excellent outcome for all shareholders.”
Vonage’s product portfolio includes UCaaS, Contact Center and Communication API (Application Programming Interface). The UCaaS industry is plagued by stiff competition with several big players vying for the top spots. And this is possibly the reason why the market and many analysts first viewed the deal with some surprise. However, the Ericsson leadership and board were convinced by the capability that Vonage’s Communication API is poised to bring in.
According to the release, the cloud-based Vonage Communications Platform (VCP) serves over 120,000 customers and more than one million registered developers globally. The API platform within VCP allows developers to embed high quality communications – including messaging, voice and video – into applications and products, without back-end infrastructure or interfaces. VCP accounts for approximately 80% of Vonage’s current revenues. Vonage’s management team projects annual growth of over 20% for VCP in the coming years.
Börje Ekholm, President and CEO of Ericsson, said: “The core of our strategy is to build leading mobile networks through technology leadership. This provides the foundation to build an enterprise business. The acquisition of Vonage is the next step in delivering on that strategic priority. Vonage gives us a platform to help our customers monetize the investments in the network, benefitting developers and businesses. Imagine putting the power and capabilities of 5G, the biggest global innovation platform, at the fingertips of developers. Then back it with Vonage’s advanced capabilities, in a world of 8 billion connected devices. Today we are making that possible.”
Long-term vision was the rationale behind the deal for both parties. Vonage’s strong developer ecosystem will get access to 4G and 5G network APIs allowing them to develop new innovative global offerings. Communication Service Providers will be able to better monetize their investments in network infrastructure by creating new API driven revenues. Businesses will benefit from the 5G performance, impacting operational performance.
Rory Read said, “Ericsson and Vonage have a shared ambition to accelerate our long-term growth strategy. The convergence of the internet, mobility, the cloud and powerful 5G networks are forming the digital transformation and intelligent communications wave, which is driving a secular change in the way businesses operate. The combination of our two companies offers exciting opportunities for customers, partners, developers and team members to capture this next wave.” The 5G API is touted to back Vonage against its competitors. And for Ericsson, it is one step further in building an enterprise business.
Ericsson enables communications service providers to capture the full value of connectivity. The company’s portfolio spans Networks, Digital Services, Managed Services, and Emerging Business and is designed to help our customers go digital, increase efficiency and find new revenue streams. Ericsson’s investments in innovation have delivered the benefits of telephony and mobile broadband to billions of people around the world. The Ericsson stock is listed on Nasdaq Stockholm and on Nasdaq New York. www.ericsson.com
Vonage (Nasdaq:VG), a global cloud communications leader, helps businesses accelerate their digital transformation. Vonage’s Communications Platform is fully programmable and allows for the integration of Video, Voice, Chat, Messaging and Verification into existing products, workflows and systems. Vonage’s fully programmable unified communications and contact center applications are built from the Vonage platform and enable companies to transform how they communicate and operate from the office or anywhere, providing enormous flexibility and ensuring business continuity. Vonage Holdings Corp. is headquartered in New Jersey, with offices throughout the United States, Europe, Israel and Asia.