It’s head scratching time. Or, as the Ben Grimm character would say “it’s clobbering time.”
Why both? Well Ericsson bought Vonage today for an immense about of money. More than they ever paid for any company and which clearly helps set a new high bar in value for cloud service companies which focus on the enterprise market globally.
The price is high and that’s the scratcher. The clobbering means someone will be. It may be the Vonage customer base which will have to endure integration and transition, vendors to Vonage who are used to their payment and procedure processes, employees who will be thrown into a very different workplace culture and the carrier/ mobile operators who already offer services like Vonage and who will now feel they, as Ericsson customers, are feeding the competition.
So here’s how I see this deal-
Pros
- Revenue on books that Ericsson needs.
- This provides Ericsson the ability to add the Vonage API set (Nexmo) into all the mobile platforms they serve at the core.
- Enables Ericsson to sell Vonage voice cloud platform into all of its mobile networks it manages which lack any cloud expertise or VoIP platform.
Cons
- Makes them a competitor to their customers. This may be good for Nokia or even Qualcomm, and possibly even Interdigital.
- Means they become increasingly dependent on others who provide core tech like SBCs and app servers.
- The technology at Vonage is split between the consumer play and the enterprise platform so I predict they will sell off the consumer business to some other VoIP provider but that revenue was in the valuation and may be overlooked by buy and sell side analysts who don’t understand the Vonage business too deeply.
Who wins? Twilio on the price of the stock as this demonstrates how older companies need to buy services from newer thinking ones who are born in the cloud as Dialpad CEO has been saying for years.
Others like 8×8, RingCentral and Dialpad who are leaders in the space will likely see suitors coming their way and knocking on their doors as M&A is a hot topic right now.
Who loses ? Short term likely Cisco who is reshaping itself, so one has to wonder how this impacts what they have to offer- mostly WebEx and Broadsoft as Ericsson has more reach into mobile and a far richer installed mobile operator base.
Oh and as for Zoom and Five9s are likely like king their chops as a competitor just got put into a spin cycle and will likely go into their own mode of “clobbering time.”
P.S. There are some good quotes from pal Dean Bubley in the FT article. Ironically, I read those after I wrote this.