Ericsson to acquire US cloud communications player for $6.2bn

4 days ago

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Vonage will become a subsidiary of the Swedish multinational, giving its developer network access to Ericsson’s 4G and 5G network APIs.

Ericsson has entered into an agreement to buy New Jersey company Vonage in a $6.2bn all-cash deal, equating to $21 per share. This represents a 28pc premium on Vonage’s closing share price on 19 November of $16.37.

Vonage provides cloud-based communications to about 120,000 clients globally. Its sales reached $1.4bn in the year ended 30 September. Vonage also provides unified communications and contact centre services, but its cloud-based communications platform delivers about 80pc of the company’s revenue, driving growth in the past three years.

Furthermore, Vonage’s API allows developers to embed its messaging, voice and video communication tools into other applications and products. This developer ecosystem of more than 1m registered globally will now get access to 4G and 5G network APIs via Ericsson.

“Vonage gives us a platform to help our customers monetise the investments in the network, benefitting developers and businesses,” said Ericsson CEO Börje Ekholm.

“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 8bn connected devices.”

The deal has received approval from the Vonage board and is now subject to shareholder and regulatory approval. It is expected to close in the first half of 2022.

Vonage will become a wholly owned subsidiary of Ericsson, reporting as a separate segment in quarterly earnings. It will continue to operate under its existing name with all 2,200 employees expected to continue in their roles.

Vonage CEO Rory Read, who joined the company last summer after seven years at Dell, will become part of Ericsson’s executive team, reporting directly to Ekholm.

This latest acquisition ties into Ericsson’s strategy to expand its offerings, particularly in wireless enterprise services. In September 2020, it acquired US company Cradlepoint to complement its existing 5G enterprise portfolio.

Read said the decision to join Ericsson is “in the best interests of our shareholders” and that the companies have a “shared ambition” in terms of long-term growth strategy.

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Elaine Burke is the editor of Silicon Republic

editorial@siliconrepublic.com