Ericsson has paid $6.2bn in cash for cloud-based services group Vonage in its biggest acquisition yet.
The Swedish telecoms equipment maker has been restructuring amid growing tension in China following Huawei crackdown.
Ericsson said it would pay $21 in cash per share, a premium of 28 per cent over Vonage’s closing price on Friday.
It comes as Ericsson wishes to enter the enterprise business, utilising Vonage’s internet telephony in the US.
Vonage’s cloud-based platform has 120,000 customers and serves 1m developers.
A spokesperson for Ericsson said that the acquisition was a “long-term strategic” one, and commented that it would bring “focused expansion into enterprise opens new sources of value for Ericsson and our shareholders, alongside existing CSP customers and businesses as they pursue their digital transformation.”
“Vonage is establishing strong, stand-alone, growth but Ericsson will accelerate this bringing 5G as a catalyst to transform growth opportunities for the business in more than 180 Ericsson markets globally.”
“Ericsson’s ability to invest in R&D at scale creates the basis for strong future performance. 5G has been designed with enterprise use in mind and we expect the demand for new services, innovations and value creation enabled by 5G will grow significantly over the coming years”, Ericsson said.
Analysts at Mirabaud Equity Research were less convinced by the strength of the deal. They said: “We think this a low-margin, low-end cloud tech with little differentiation and needs heavy lifting to close deals at low margins.”
“Management had sought a buyer of the consumer business before but decided to keep it and milk it for cash after no satisfactory price was received. Ericsson doesn’t appear to be buying a leader here, but a company that has underinvested in R&D and struggled to move upmarket.”
More to follow