Sweden’s Ericsson snaps up cloud firm Vonage in $6.2 bln deal | Reuters
Interesting times in the world of telecom! A couple of weeks ago, the industry heard about MItel, exiting the cloud business, (https://lnkd.in/gji9Xezn), and today we learn Ericsson is buying Vonage, to enter the cloud business. So, Mitel out of cloud, Ericsson In! However, the strategic motivations are different for each of these transactions.
Mitel’s was a complete capitulation to its strongest competitor Ring Central and the need for Searchlight Capital Partners (Searchlight Capital – Home) to accelerate a return on their $2B investment in Mitel, and getting $650M from Ring Central certainly helped.
Ericsson’s domination in the MTSO space and telco central offices is legendary, but maybe the dominance is waning, and they have concerns about their role in 5G, so they start buying- last year Cradlepoint, and today Vonage.
My concern with this deal is that a traditional equipment manufacturer’s business model and revenue generation is much different than the revenue model for subscription based services- money up front versus on a drip. The money up front guys usually want to keep it that way!
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