SBI-led consortium raises Rs 792 crore by sale of Vijay Mallya's UB shares

fixture of pandemic work-from-home, Amazon

Zoom Video Communications has agreed to acquire Five9 for US$14.7 billion in its largest ever acquisition, targeting a call centre provider to bolster its popular videoconference app against stiffening competition.

Zoom will use its surging stock to pay for the deal, giving Five9 investors 0.5533 shares of its class A common stock under an agreement announced Sunday. The target firm will become an operating unit of Zoom’s after the deal, which is subject to shareholder approval and slated to close in the first half of 2022.

Zoom, a fixture of pandemic work-from-home and remote schooling, has been looking for ways to keep growing as workers in some countries return to the office and schools reopen. The acquisition could propel Zoom into a US$24 billion market for contact centers, the company said, helping it better compete with the likes of RingCentral and Amazon.com in letting clients provide customer service via the internet. One beneficiary could be Zoom Phone, a cloud-based calling service.

“We are continuously looking for ways to enhance our platform, and the addition of Five9 is a natural fit,” Zoom Chief Executive Officer Eric Yuan said in a statement.

Five9’s customers include big names like Under Armour, Citrix, Athena Health and Lululemon, according to its website, and the transaction is designed as a way for Zoom and Five9 to sell products to each others’ customers. Rowan Trollope, CEO of Five9, will become a president at Zoom while continuing to run Five9 as an operating unit. Goldman Sachs advised Zoom and Qatalyst Partners advised Five9.

Zoom rose to prominence after the pandemic hit in early 2020, becoming ubiquitous as people forced home by lockdowns used the service to connect remotely to work, school, friends and family. But investors have raised concerns this year about whether that growth will continue as vaccinations increase and shutdowns end.

As pandemic lockdowns have waned, the future of remote work has become a pressing question, and Zoom’s competitors have launched hybrid work features in a race to accommodate companies’ needs. Microsoft unveiled design changes to its Teams platform to improve remote workers’ interactions in meetings. Alphabet’s Google has revealed updates to its Workspace productivity suite, including new tools for its Meet videoconferencing system.

The unified communications and collaboration (UC&C) market share of total IT spending may remain stable at around 5 per cent as companies shift to cloud-native platforms, and should stay so post-pandemic. That’s because organizations are rethinking their plans for digital technologies to include video, voice and team collaboration tools as flexible or hybrid-work models gain traction. UCaaS should stay a key growth driver for the US$47 billion UC&C industry, with companies increasingly bundling video and collaboration solutions on the cloud to accommodate the secular change in work culture.

Zoom is taking advantage of a stunning stock rally to bankroll the acquisition of Five9. Its stock soared about five-fold during 2020 and has risen another 7.3 per cent in the year to date, pushing its market value past US$100 billion.

Five9 competes in a market for cloud services that help companies handle customers. Amazon entered the market with Amazon Connect in 2017. Other vendors include Talkdesk and Vonage Holdings.

The acquisition, according to data compiled by Bloomberg, is the fourth deal by Zoom since the start of the pandemic. In June, Zoom announced without disclosing terms that it had signed a deal to acquire German start-up Karlsruhe Information Technology Solutions-kites, a translation software maker.

In March, Zoom was part of a group that acquired a minority stake in software firm Assembled, the data showed. And in May 2020, it bought Keybase Financial Group, which makes a secure messaging and file-sharing service, for undisclosed terms to bolster its encryption technology.

Zoom was founded in 2011 by Yuan, the Chinese-born son of mining engineers who grew up in Shandong province. Yuan idolised Microsoft founder Bill Gates and longed to work in Silicon Valley. After two years of failed efforts to secure a US visa, he succeeded on his ninth try. Early on, he worked at then-start-up Webex, the online conferencing tool that was later acquired by Cisco Systems. He rose through the ranks to become a vice-president of engineering, managing 800 workers, and agitated unsuccessfully for Cisco to develop a product that worked on mobile phones, as well as PCs. As it surged in popularity during the pandemic, Zoom suffered growing pains, often coming under criticism for privacy lapses. It was chided for a policy that let it share the content of video chats with ad-tracking companies, and it made claims about privacy protection using end-to-end encryption that weren’t true. In one of the most startling revelations, made by University of Toronto researchers, Zoom sometimes routed meetings through servers in China even when participants were outside the country. That raised the prospect of snooping by Chinese authorities. The company went on to address several issues, with Yuan apologising publicly.

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