Zoom bets on AI with US $ 14,700M deal to buy Five9

(Bloomberg) – Zoom Video Communications Inc., whose online conferencing services took off during the COVID-19 pandemic, has agreed to acquire Five9 Inc. for $ 14.7 billion, leveraging its share growth to expand into an adjacent market that could potentially boost revenue as quarantines end.

The value of the stock offering is $ 200.18 a share, based on Zoom’s common stock closing price on Friday, compared to Five9’s $ 177.60 price on Friday, the companies said in a released on Sunday. The target company will become a Zoom operating unit after the deal, which is subject to shareholder approval and is scheduled to close in the first half of 2022.

Zoom has been looking for ways to continue growing as workers begin to return to the office and students to school, and the agreement will help expand the offering to its most lucrative businesses and corporate clients. San Ramon, California-based Five9 makes cloud-based software that uses artificial intelligence to help businesses answer and interact with customers’ questions regardless of language, location, or device.

The traditional call center, where a customer service representative answered by phone, is now via the internet and now works frequently with chatbots. The market for these cloud-based call centers is estimated at $ 24 billion, according to the companies. Together, Zoom and Five9 aim to better compete with companies like Cisco Systems Inc., RingCentral Inc., and Inc.

Zoom CEO Eric Yuan said Five9 was a “natural fit” and that Five9 is complementary to Zoom Phone, the company’s arm that replaces the company’s traditional phone services with modern cloud-based offerings. But some analysts thought it was a costly attempt at growth that Zoom could not achieve on its own.

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“This is a high-priced deal that appears to attempt to build on the Zoom Phone offering,” said Neil Campling, an analyst at Mirabaud Securities. “Paying such a high price for an undifferentiated offering would indicate that it is trying to move into adjacent markets as Zoom’s boom wanes.”

Five9’s clients include big names like Under Armor, Citrix, Athena Health and Lululemon, according to its website. Rowan Trollope, CEO of Five9, will become President of Zoom while continuing to lead Five9 as an operating unit. Goldman Sachs advised Zoom and Qatalyst Partners advised Five9.

The joint selling relationship between Zoom and Five9 served to join forces, and the decision was based on “strong” customer interest in having an integrated solution, Trollope said in a call with analysts Monday. “This is not a way out, it is just the beginning. We can come together to revolutionize this space ”.

Zoom rose to prominence after the pandemic in early 2020 and became ubiquitous as isolation forced people to use the service to connect remotely with work, school, friends and family. But investors have expressed concern this year about whether that growth will continue as immunization increases and quarantines end.

As closures wind down, the future of remote work becomes a pressing issue, and Zoom’s competitors have launched hybrid work features in a race to adapt to business needs. Microsoft Corp. revealed design changes to its Teams platform to improve remote worker interactions in meetings. Alphabet Inc.’s Google revealed updates to its Workspace productivity suite, including new tools for its Meet video conferencing system.

The Five9 deal helps Zoom “grow its platform and participate in another booming market of the cloud transition as digital transformation efforts take hold,” analysts at Morgan Stanley wrote.

Five9 competes in a market for cloud services that help companies manage customers. Amazon entered the market with Amazon Connect in 2017. Other providers include Talkdesk Inc. and Vonage Holdings Corp.

The acquisition is Zoom’s fourth since the start of the pandemic, according to data compiled by Bloomberg. In June, Zoom announced that it had signed an agreement to acquire German startup Karlsruhe Information Technology Solutions-kites GmbH, a manufacturer of translation software.

In March, Zoom was part of a group that acquired a minority stake in software company Assembled Inc., the data showed. And in May 2020, it bought Keybase Financial Group Inc., which offers a secure messaging and file-sharing service, for undisclosed terms, to beef up its encryption technology.

Zoom was founded in 2011 by Yuan, a Chinese-born son of engineers. Yuan idolized Microsoft founder Bill Gates and longed to work in Silicon Valley. After two years of unsuccessful efforts to obtain a US visa, he was successful on his ninth attempt. At first, he worked at the then startup Webex, the online conferencing tool that was later acquired by Cisco. He rose through the ranks to become vice president of engineering, managing 800 employees, and unsuccessfully tried to get Cisco to develop a product that would work on mobile phones as well as PCs. As he gained popularity during the pandemic, Zoom suffered with his growth. , often criticized for privacy flaws. In one of the most surprising revelations, by researchers at the University of Toronto, Zoom sometimes routed meetings through servers in China, even when participants were out of the country. The company continued to address various issues, and Yuan publicly apologized.

Original Note: Zoom Bets on AI with $ 14.7 Billion Deal to Acquire Five9 (1)

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