Zoom Video Communications Inc., whose online conferencing services took off during the Covid-19 pandemic, agreed to acquire Five9 Inc. for $14.7 billion, using its surging stock to expand into an adjacent market that could bolster revenue as lockdowns end.
The value of the all-stock offer is $200.18 a share based on the closing price for Zoom’s common stock on Friday, compared with Five9’s $177.60 price on Friday, the companies said a statement Sunday. The target firm will become an operating unit of Zoom’s after the deal, which is subject to shareholder approval and slated to close in the first half of 2022.
Zoom has been looking for ways to keep growing as workers begin to return to the office and students go back to school. Five9 specializes in contact centers, a market the companies estimate at $24 billion. Together, Zoom and Five9 aim to better compete with the likes of Cisco Systems Inc., RingCentral Inc. and Amazon.com Inc. in letting clients provide customer service via the internet. One beneficiary could be Zoom Phone, a cloud-based calling service.
With more workflows going digital, organizations are also no longer looking at contact center interactions with customers in a vacuum,” said Carolina Milanesi, president and principal analyst at Creative Strategies. “Being able to leverage the data across, say, sales or when escalating an issue can be more seamless when done on one platform.”
She pointed out that Cisco has tied its contact center product with its Webex teleconferencing software, making it more of a one-stop-shop. The Zoom deal give the company similar strategies for integrating online chat and conferencing products, she said, adding that Five9 also provides Zoom access to artificial intelligence tools for analyzing data from a contact center.
Five9’s customers include big names like Under Armour, Citrix, Athena Health and Lululemon, according to its website. Rowan Trollope, CEO of Five9, will become a president at Zoom while continuing to run Five9 as an operating unit. Goldman Sachs advised Zoom and Qatalyst Partners advised Five9.
“We are continuously looking for ways to enhance our platform, and the addition of Five9 is a natural fit,” Zoom Chief Executive Officer Eric Yuan said in a statement.
Zoom rose to prominence after the pandemic hit in early 2020, becoming ubiquitous as people forced home by lockdowns used the service to connect remotely to work, school, friends and family. But investors have raised concerns this year about whether that growth will continue as vaccinations increase and shutdowns end.
As pandemic lockdowns have waned, the future of remote work has become a pressing question, and Zoom’s competitors have launched hybrid work features in a race to accommodate companies’ needs. Microsoft Corp. unveiled design changes to its Teams platform in order to improve remote workers’ interactions in meetings. Alphabet Inc.’s Google has revealed updates to its Workspace productivity suite, including new tools for its Meet videoconferencing system.
The Five9 deal helps Zoom “grow their platform and participate in another market at the cusp of transitioning to the cloud as digital transformation efforts take hold,” Morgan Stanley analysts wrote.
“The unified communications and collaboration (UC&C) market share of total IT spending may remain stable at around 5% as companies shift to cloud-native platforms, and should stay so postpandemic,” said Bloomberg Intelligence analysts Amine Bensaid and Mandeep Singh.
“That’s because organizations are rethinking their plans for digital technologies to include video, voice and team collaboration tools as flexible or hybrid-work models gain traction. UCaaS should stay a key growth driver for the $47 billion UC&C industry, with companies increasingly bundling video and collaboration solutions on the cloud to accommodate the secular change in work culture.
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Source: mybroadband
