Ericsson to Take Out Vonage

This morning there was a significant inorganic shift in the cloud communications space. The Swedish vendor Ericsson has entered into an agreement to buy none other than Vonage.

The deal would see Ericsson bring the the erstwhile consumer VoIP pioneer in-house. But these days 80% of Vonage’s revenue come from the Vonage Communications Platform and the API used by 1M+ developers to leverage its reach and voice expertise. It’s that CPaaS asset that Ericsson is focusing on. So while Ericsson is becoming a service provider to the consumer and enterprise markets in some sense, that isn’t necessarily their main aim.

Last year, Ericsson bought Cradlepoint to better take on the 5G enterprise solution space, starting with the Wireless Edge WAN. Ericsson says that the purchase of Vonage will enable them to expand their capabilities on the same front, combining the two developer ecosystems and APIs under one umbrella as 5G gains momentum.

The deal will cost Ericsson some $6.2B in cash and is expected to close in the first half of 2022. Vonage shareholders will receive $21/share, a 28% premium to the close of trading on Friday. Ericsson says it will be accretive to EPS and FCF in 2024.  Operationally, Vonage will continue as usual as a subsidiary of Ericsson, and Vonage CEO Rory Read will join the Ericsson executive team.

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Categories: Mergers and Acquisitions · Unified Communications · VoIP