Ericsson Acquires Cloud Firm Vonage For $6.2 Bn

Ericsson Acquires Cloud Firm Vonage For $6.2 Bn

Swedish networking and telecommunication company– Ericsson announced on Monday that it is acquiring cloud communications firm Vonage for $6.2 billion.

The deal follows the Stockholm based firm’s $1.1 billion acquisition of Cradlepoint, a wireless networking business located in the United States, in 2020.

“The merger agreement was approved unanimously by the Board of Vonage. The transaction builds upon Ericsson’s stated intent to expand globally in the wireless enterprise, offering existing customers an increased share of a market valued at $700 billion by 2030,” Ericsson said in a statement.

As the day progresses, the impact of the news on social engagement for the stock of Ericsson among Twitter and Reddit users will be printed on Quantale’s dashboard.

On Friday, on the dashboard of Quantale, Ericsson’s stock activity increased by 550 percent, but its trading volume decreased by 29.74 percent.

A total of 3.85  million shares of the stock exchanged hands on Friday, 1.56 million below the daily average of 5.41 million. The stock closed at $ 10.92 apiece. Today, the shares of Ericsson opened at $10.38, down 520% from the previous day’s close.

Ericsson to acquire Vonage

Vonage registered sales of $1.4 billion in the trailing 12-months to Sept. 30 2021, and over the same period, the company posted an adjusted EBITDA margin of 14% and free cash flow of USD 109 million.

Börje Ekholm, Ericsson president and CEO said that this acquisition is a step towards expanding his company’s presence in the wireless enterprise and broadening its global offerings.

“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.

Ekholm was named CEO of Ericsson in 2017, and since then, he has been working out on restructuring the corporation after Ericsson’s foray into multimedia in the early 2000s. The company found it hard to fit its acquisitions into its operations, putting pressure on margins and profitability.

The cloud-based Vonage Communications Platform (VCP) has more than 120,000 customers under its belt and serves over one million registered developers globally.

VCP accounts for almost 80% of Vonage’s current revenues and delivered revenue growth of more than 20% in the three-year period to 2020, with adjusted EBITDA margins improving drastically from -19% in 2018 to break-even in the 12-month period to 30 September 2021.

Ericsson said that this deal is likely to boost earnings per share — excluding non-cash amortization impacts — and free cash flow from 2024 and beyond.

The acquisition deal has yet to receive approval from the Vonage board and various regulatory bodies, but Ericsson anticipates closing the deal in the first half of next year.