Ericsson agreed to acquire Vonage, one of the earliest developers of a commercial VoIP service, for US$6.2 billion in cash.
Vonage traces its roots to 1998 when Jeff Pulver established Min-X.com as a VoIP exchange. In 2001, the company changed its name to Vonage and launched a commercial VoIP services aimed at consumers. Vonage went public in 2006. Vonage is headquartered in Holmdel, New Jersey and has 2,200 employees throughout the United States, EMEA and APAC.
Currently, the cloud-based Vonage Communications Platform (VCP) serves over 120,000 customers and more than one million registered developers globally. The API platform within VCP allows developers to embed high quality communications - including messaging, voice and video - into applications and products, without back-end infrastructure or interfaces. Vonage also provides Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS) solutions as part of the Vonage Communications Platform.
Sales were US$1.4 billion in the 12-month period to 30 September 2021, and over the same period, Vonage delivered an adjusted EBITDA margin of 14% and free cash flow of US$109 million.
VCP accounts for approximately 80% of Vonage’s current revenues and delivered revenue growth in excess of 20% in the three-year period to 2020, with adjusted EBITDA margins moving from -19% in 2018 to break-even in the 12-month period to 30 September 2021. Vonage’s management team projects annual growth of over 20% for VCP in the coming years.
Ericsson said the deal accelerates its strategy to expand its presence in wireless enterprise and broaden its global offerings.
Börje Ekholm, President and CEO of Ericsson, says: “The core of our strategy is to build leading mobile networks through technology leadership. 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, benefitting developers and businesses. Imagine putting the power and capabilities of 5G, the biggest global innovation platform, at the fingertips of developers. Then back it with Vonage’s advanced capabilities, in a world of 8 billion connected devices. Today we are making that possible.”
“Today Network APIs are an established market for messaging, voice and video, but with a significant potential to capitalise on new 4G and 5G capabilities. Vonage’s strong developer ecosystem will get access to 4G and 5G network APIs, exposed in a simple and globally unified way. This will allow them to develop new innovative global offerings. Communication Service Providers will be able to better monetize their investments in network infrastructure by creating new API driven revenues. Finally, businesses will benefit from the 5G performance, impacting operational performance, and share in new value coming from sapplications on top of the network.”
Rory Read, CEO of Vonage, says: “Ericsson and Vonage have a shared ambition to accelerate our long-term growth strategy. The convergence of the internet, mobility, the cloud and powerful 5G networks are forming the digital transformation and intelligent communications wave, which is driving a secular change in the way businesses operate. The combination of our two companies offers exciting opportunities for customers, partners, developers and team members to capture this next wave.”
On completion, Vonage will become a wholly owned subsidiary of Ericsson and will continue to operate under its existing name. It will be reported as a separate segment in Ericsson accounts.
Ericsson has acquired privately-held Cradlepoint, a provider of Wireless Edge WAN 4G and 5G Enterprise solutions, for US$1.1 billion.
Cradlepoint operates a subscription-based cloud platform that uses wireless edge routers designed to connect fixed and mobile sites, vehicles, field forces, and loT devices over LTE and 5G. The service hepls enterprises connect branch, mobile and IoT endpoints on one WAN. Cradlepoint, which is based in Boise, Idaho, will become a fully owned subsidiary of Ericsson while continuing to operate under its existing brand and be part of Ericsson’s Business Area Technologies & New Businesses. Cradlepoint currently has more than 650 employees. The company was founded in 2006. In addition to its headquarters in Boise, the company operates a research and development center in Silicon Valley, California, and new market offices in the United Kingdom and Australia.
Ericsson said the acquisition advances its ongoing mission to capture market share in the rapidly expanding 5G Enterprise space. Cradlepoint complements Ericsson’s existing 5G Enterprise portfolio which includes Dedicated Networks and a global IoT platform.
Cradlepoint’s sales for 2019 were SEK 1.2 b. with a gross margin of 61%. Ericsson’s operating margins are expected to be negatively impacted by approximately 1% in 2021 and 2022 - where half is related to amortization of intangible assets which arise from the acquisition. Cradlepoint is expected to contribute to operating cash-flow starting in 2022. Ericsson’s 2022 group financial targets remain unchanged.
