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Ericsson to acquire cloud communications company Vonage for $6.2B

·2-min read

Ericsson, an international networking company, decided it needed a dose of modernization and this morning announced its intent to acquire cloud communications company Vonage in a $6.2 billion deal.

With Vonage, Ericsson is getting a more modern approach to communications that includes a cloud contact center, communications APIs (like Twilio's) and a voice over internet protocol (VoIP) solution. The company believes that it can build on its 4G and 5G networking technology by taking advantage of the key pieces of the Vonage family.

Börje Ekholm, Ericsson president and CEO, said that this is part of a strategy by the company to begin capturing more enterprise business.

"This provides the foundation to build an enterprise business. The acquisition of Vonage is the next step in delivering on that strategic priority. Vonage gives us a platform to help our customers monetize the investments in the network, benefiting developers and businesses," he said in a statement.

Specifically, Ericsson is focused on Vonage's communications APIs, which it believes will enable it to tap into a network of developers across the world building applications based on 4G and 5G technology.

Rory Read, CEO of Vonage, indicated it was a deal that was too good to turn down and sees combining forces with the much larger corporation as ultimately good for his company.

"We believe joining Ericsson is in the best interests of our shareholders and is a testament to Vonage’s leadership position in business cloud communications, our innovative product portfolio and outstanding team," Read said in a statement.

With Vonage, the company not only gets the technology portfolio -- it gets a healthy business that generated $1.4 billion in the 12-month period ending September 30. It also gets access to 120,000 Vonage customers and more than 1 million registered developers, according to the company.

Vonage launched in 2001 with a VoIP product and raised almost $600 million, according to Crunchbase data, before going public in 2006. It acquired cloud contact center startup NewVoiceMedia in 2018 for $350 million.

Today's merger deal is subject to approval by the Vonage board and various regulatory bodies, but Ericsson still expects it to close sometime in the first half of next year.

Vonage stock is flying high this morning, up 25% on the news. Investors are less enamored with Ericsson, with stock down 4.89% as of publication.

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