Ericsson to pay $6bn for cloud-based services group Vonage
Ericsson is paying $6.2bn in cash for cloud-based services group Vonage as the Swedish telecoms equipment maker aims to increase its offering for companies and developers.To get more latest news about ericsson, you can visit shine news official website.
The acquisition, Ericsson’s biggest ever, marks the group’s latest attempt to diversify alongside its core mobile infrastructure business after a failed attempt to move into media in the 2010s.It also comes after years of restructuring and preparation for the new 5G networks and amid pressure over its business in China as it pays the price for Stockholm’s crackdown on rival Huawei.
Vonage, a pioneer of internet telephony in the US that competes with the likes of RingCentral, had a market value of about $3.6bn in September before activist investor Jana Partners started agitating for it to sell itself or break up.
Ericsson said it would pay $21 in cash per share, a premium of 28 per cent over Vonage’s closing price on Friday.Ericsson is looking to move into the enterprise business, in which developers create services on top of telecoms networks, after seeing more value being created by companies such as Uber than by itself and other equipment makers.
Borje Ekholm, Ericsson’s chief executive, said Ericsson wanted to help telecoms operators get more out of their investments in new networks after seeing other companies such as app developers take much of the rewards from previous upgrades.
“If you look at the network, significant investments are going into them but there is very limited monetisation so far. We want to improve the monetisation capability. Network operators aren’t going to build out 5G unless they can monetise it,” he said.
Vonage’s cloud-based platform has 120,000 business customers and serves 1m developers, allowing Ericsson to tap a bigger enterprise audience than it currently has. The Swedish group is hoping to bring the faster speeds and capabilities of its 5G networks to business customers to create an open innovation platform for telecoms operators, developers, and businesses.
Dean Bubley, founder of Disruptive Analysis, said the takeover would strengthen Ericsson’s exposure to the cloud and enterprise market, but the telecoms equipment maker would need to be careful not to scare its core telecoms customers as it had acquired a competitor company.
He argued that Ericsson “needs proper cloud communications [technology]” if it is going to compete with Cisco, Microsoft, Zoom and Twilio.
Ericsson, which said the deal would be financed through its existing cash pool, reaffirmed its financial targets including an operating profit margin of 12-14 per cent next year, excluding Vonage. Completion of the deal is subject to regulatory approval and is expected in the first half of next year.
The Swedish group said it expected revenue synergies of about $400m and some cost efficiencies, while the deal should be accretive to adjusted earnings per share and free cash flow by 2024.
Ericsson is paying $6.2bn in cash for cloud-based services group Vonage as the Swedish telecoms equipment maker aims to increase its offering for companies and developers.To get more latest news about ericsson, you can visit shine news official website.
The acquisition, Ericsson’s biggest ever, marks the group’s latest attempt to diversify alongside its core mobile infrastructure business after a failed attempt to move into media in the 2010s.It also comes after years of restructuring and preparation for the new 5G networks and amid pressure over its business in China as it pays the price for Stockholm’s crackdown on rival Huawei.
Vonage, a pioneer of internet telephony in the US that competes with the likes of RingCentral, had a market value of about $3.6bn in September before activist investor Jana Partners started agitating for it to sell itself or break up.
Ericsson said it would pay $21 in cash per share, a premium of 28 per cent over Vonage’s closing price on Friday.Ericsson is looking to move into the enterprise business, in which developers create services on top of telecoms networks, after seeing more value being created by companies such as Uber than by itself and other equipment makers.
Borje Ekholm, Ericsson’s chief executive, said Ericsson wanted to help telecoms operators get more out of their investments in new networks after seeing other companies such as app developers take much of the rewards from previous upgrades.
“If you look at the network, significant investments are going into them but there is very limited monetisation so far. We want to improve the monetisation capability. Network operators aren’t going to build out 5G unless they can monetise it,” he said.
Vonage’s cloud-based platform has 120,000 business customers and serves 1m developers, allowing Ericsson to tap a bigger enterprise audience than it currently has. The Swedish group is hoping to bring the faster speeds and capabilities of its 5G networks to business customers to create an open innovation platform for telecoms operators, developers, and businesses.
Dean Bubley, founder of Disruptive Analysis, said the takeover would strengthen Ericsson’s exposure to the cloud and enterprise market, but the telecoms equipment maker would need to be careful not to scare its core telecoms customers as it had acquired a competitor company.
He argued that Ericsson “needs proper cloud communications [technology]” if it is going to compete with Cisco, Microsoft, Zoom and Twilio.
Ericsson, which said the deal would be financed through its existing cash pool, reaffirmed its financial targets including an operating profit margin of 12-14 per cent next year, excluding Vonage. Completion of the deal is subject to regulatory approval and is expected in the first half of next year.
The Swedish group said it expected revenue synergies of about $400m and some cost efficiencies, while the deal should be accretive to adjusted earnings per share and free cash flow by 2024.