Zoom Video Communications Inc made its biggest-ever purchase, a $14.7 billion all-stock deal to buy cloud-based call centre operator Five9 Inc, as competition in its core videoconferencing market heats up.
The teleconferencing services provider is an investor favourite in the year following the coronavirus outbreak, as schools and businesses have used its services to organise virtual lessons, office meetings, and social gatherings.
As significant rivals like Facebook and Alphabet’s Google ramp up their video offerings, the San Jose, California-based startup is now focusing on its two-year-old cloud-calling product Zoom Phone and conference-hosting product Zoom Rooms.
Zoom said in a statement on Sunday that the acquisition will “help boost Zoom’s footprint with enterprise customers and allow it to accelerate its long-term development opportunity by adding the $24 billion contact centre market.”
By integrating Five9’s business customers and merging its contact centre software to maximise customer interactions across channels, the purchase will supplement Zoom Phone, an alternative to legacy phone options.
According to the company’s website, customers include Under Armour, Lululemon Athletica Inc, and Olympus Corp.
Five9 will grow as an operating unit of Zoom, and its CEO, Rowan Trollope, will become the firm’s president, keeping on as the unit’s leader when the purchase closes in the first half of 2022.
Based on the closing share price of Zoom Class A common stock on July 16, this equates to $200.28 per share of Five9 common stock, or a nearly 13 per cent premium, and an implied deal value of $14.7 billion.
Zoom’s stock increased 1.4 per cent to $361.97 on Friday, putting the firm at about $106 billion. Zoom went public in 2019.
Zoom’s revenue increased 45 per cent in the last year, as conferencing platforms such as Cisco Systems Inc’s Webex and Microsoft Teams saw a boom in use due to the coronavirus pandemic, which has prompted a seismic shift in online working, learning, and socialising.
According to Gartner, global expense on cloud-based conferencing is expected to reach $5.41 billion this year, up from $5.02 billion in 2020. Although it does not keep track of market share, analysts say Zoom and Cisco are the market leaders.