Zoom Sunday announced that it’s buying Five9, a provider of cloud contact center software, in an all-stock transaction valuing the company at $14.7 billion.
This is the company’s first billion-dollar acquisition and It comes at a time when the San Jose, California-based company prepares for a post-pandemic slowdown following its explosive growth in 2020.
Eric Yuan, the Zoom chief executive, has been eager to capitalise on the huge audience that signed up to its services last year as millions of people were forced to log into virtual meetings during lockdowns. He said this year that the company would move to expand its range of communications services.
“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,” he revealed in a statement on Sunday.
The deal brings together two former executives at Cisco. Yuan, who founded Zoom in 2011, previously helped build WebEx, which Cisco bought in 2007 for $3.2 billion. He stayed at Cisco until he left to start Zoom.
Trollope becomes a president of Zoom but remain as CEO of Five9, reporting to Yuan.
Trollope joined Cisco in 2012 after a 22-year career at Symantec. He eventually rose to become senior vice president in charge of all of Cisco’s collaboration products and was seen by some analysts as the top lieutenant to CEO Chuck Robbins. He departed to take the CEO role at Five9 in 2018.
The all-stock transaction values Five9 shares at $200.28 with shareholders in the company set to receive 0.5533 shares of Zoom class A common stock. Shares in Five9 closed at $177.60 on Friday.
Zoom has been among the top growth stories in the 16 months since Covid-19 caused a sudden shutdown of offices across the globe, forcing workers in finance, retail, tech and law offices to communicate from remote locations.
In the 12 months to January 31, Zoom’s annual sales quadrupled to $2.65bn and its share price has risen more than 400 per cent since the start of 2020, though it remains below its October high.
After expanding revenue by 326% in 2020, Zoom faces a natural slowdown, especially as companies reopen and face-to-face meetings resume. While the company has launched new products to reckon with coming changes to its business, it’s now so big that organic growth alone is unlikely to satisfy Wall Street. It also needs new revenue sources as Microsoft ramps up competition in video chat with Teams.
Zoom’s stock price jumped almost 400% last year, though it’s dropped 36% since reaching its peak in October.
Five9 has on the other hand, seen rapid growth since early 2020 as demand surged for call center technology that would allow representatives to do their jobs from home. Companies had to quickly adapt to cloud software of all sorts, including for their contact centers.
While Zoom is predominantly known for its video conferencing services, it has been promoting various office collaboration products including Zoom Phone, a cloud phone system, and its conference software, Zoom Rooms.
Five9’s software is used by a number of companies that Zoom is seeking to displace, including Microsoft Teams and Salesforce. In 2017, Mike Burkland, now the company’s chair, told Barron’s that he expected Five9 to be purchased by one of its larger partners.
The transaction is expected to close in the first half of 2022. Five9 stockholders still have to approve the deal, and it requires regulatory clearance. Goldman Sachs advised Zoom on the acquisition, and Frank Quattrone’s Qatalyst Partners advised Five9.