Zoom video call laptop
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Zoom Video Communications late Sunday announced a deal to buy the cloud- based contact center software company Five9 for $14.7 billion in Zoom stock.
The deal represents a partial answer to how Zoom Video Communications (ticker: ZM) plans to grow its business after its astonishing expansion during the pandemic. Zoom has been adding new offerings to its core video conferencing service – including cloud-based telephony, an app store and new event software – but Zoom’s growth will slow dramatically from the 2020 level.
The deal for Five9 (FIVN) will instantly make Zoom a major player in call center software, where it will compete with companies like RingCentral (RNG), Vonage (VG) and privately held Genesys.
“We are continuously looking for ways to enhance our platform, and the addition of Five9 is a natural fit that will deliver even more happiness and value to our customers,” Zoom CEO Eric Yuan said in a statement. “Enterprises communicate with their customers primarily through the contact center, and we believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers.”
Five9 holders will receive 0.5533 Zoom shares for each Five9 share. Based on Friday’s closing price of Zoom shares, the transaction would value Five9 at $200.28 a share. Five9 shares closed Friday at $177.60.
The deal is subject to the approval of Five9 stockholders, various regulatory approvals and other customary closing conditions. The boards of both companies have approved the deal. The transaction is expected to close in the calendar 2022 first half.
Five9 CEO Rowan Trollope will continue in his current role, reporting to Yuan.
In a research note late Sunday, Piper Sandler analyst James Fish wrote that the deal makes “complete sense over the long-term,” making Zoom “an even more formidable force” in the communications software sector. Fish does say that he thinks Five9 holders will question the relatively low premium for the deal.
Zoom shares on Friday gained 1.5%, to $361.97, giving the company a market cap of about $107 billion.
Five9 reported March quarter revenue of $137.9 million, up 45% from the year earlier quarter. The company posted a non-GAAP profit of $16.1 million, or 23 cents a share; on a GAAP basis, lost $12.3 million of 18 cents a share. For all of 2021, Five9 projects revenue of $548.5 million to $551.5 million, with a profit of 89 to 93 cents on a non-GAAP basis; on a GAAP basis the company expects a loss of 87 to 91 cents a share.
For its fiscal first quarter ended April 30, Zoom posted revenue of $956.2 million, up 191% from a year ago. For the July quarter, Zoom projects revenue of $985 million to $990 million. For the January 2022 fiscal year, Zoom sees revenue of $3.975 billion to $3.99 billion.
Zoom did not immediately disclose how the deal will impact its financial results after the close of the transaction.
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