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Ericsson (ERIC) Inks Deal to Acquire Vonage for $6.2 Billion
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Ericsson (ERIC - Free Report) has inked a deal to acquire Vonage Holdings Corp. for $21 per share or almost $6.2 billion in cash.
Headquartered in Holmdel, NJ, Vonage is a global provider of cloud-based communications. The company has a strong track record of growth and margin expansion.
The deal has been approved unanimously by Vonage’s board of directors. The acquisition highlights Ericsson’s strategy to expand its presence in the wireless enterprise and broaden its offerings.
Vonage’s Communications Platform (VCP) serves more than 120,000 customers and 1 million registered developers globally. VCP accounts for nearly 80% of its total revenues.
Vonage’s presence in the Communication Platform as a Service segment will allow Ericsson to access a substantial and high growth segment. Ericsson’s leadership in 5G technology will boost the developing space for open network application programming interfaces.
Ericsson continues to expand its footprint by leveraging its competitive 5G portfolio. The stock has lost 9.4% in the past year against the industry’s growth of 26.6%.
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The combination of Vonage’s customers and developer community with Ericsson’s network expertise and R&D will create opportunities to accelerate innovation in the market.
Ericsson aims to offer benefits to the entire ecosystem, including telecom operators, developers and businesses. It will create a global platform for open network innovation, powered by Ericsson’s and Vonage’s solutions.
The transaction is expected to deliver near-term revenue synergy opportunities. Ericsson also expects to achieve some cost efficiencies following the completion of the transaction. On completion, Vonage will become a wholly owned subsidiary of Ericsson and will continue to operate under its existing name.
Ericsson is committed to its previously-announced financial targets. These include long-term EBITA margins of 15-18%, long-term free cash flow before M&A of 9-12% of sales, and a 2022 target EBIT margin of 12-14% for Ericsson Group, excluding Vonage.
The buyout is expected to be accretive to Ericsson’s earnings per share (excluding non-cash amortization impacts) and free cash flow before M&A from 2024 onward.
The transaction is expected to be completed in the first half of 2022, subject to Vonage’s shareholder approval and customary conditions.
Clearfield, Inc. (CLFD - Free Report) is a better-ranked stock in the industry, sporting a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 8.8% upward over the past 30 days.
Clearfield delivered a trailing four-quarter earnings surprise of 50.8%, on average. It has soared 186.7% in the past year.
Qualcomm, Inc. (QCOM - Free Report) , carrying a Zacks Rank #2 (Buy), is another solid pick for investors. The consensus estimate for current-year earnings has been revised 0.5% upward over the past seven days.
Qualcomm delivered a trailing four-quarter earnings surprise of 11.2%, on average. It has gained 28.6% in the past year.
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Ericsson (ERIC) Inks Deal to Acquire Vonage for $6.2 Billion
Ericsson (ERIC - Free Report) has inked a deal to acquire Vonage Holdings Corp. for $21 per share or almost $6.2 billion in cash.
Headquartered in Holmdel, NJ, Vonage is a global provider of cloud-based communications. The company has a strong track record of growth and margin expansion.
The deal has been approved unanimously by Vonage’s board of directors. The acquisition highlights Ericsson’s strategy to expand its presence in the wireless enterprise and broaden its offerings.
Vonage’s Communications Platform (VCP) serves more than 120,000 customers and 1 million registered developers globally. VCP accounts for nearly 80% of its total revenues.
Vonage’s presence in the Communication Platform as a Service segment will allow Ericsson to access a substantial and high growth segment. Ericsson’s leadership in 5G technology will boost the developing space for open network application programming interfaces.
Ericsson continues to expand its footprint by leveraging its competitive 5G portfolio. The stock has lost 9.4% in the past year against the industry’s growth of 26.6%.
The combination of Vonage’s customers and developer community with Ericsson’s network expertise and R&D will create opportunities to accelerate innovation in the market.
Ericsson aims to offer benefits to the entire ecosystem, including telecom operators, developers and businesses. It will create a global platform for open network innovation, powered by Ericsson’s and Vonage’s solutions.
The transaction is expected to deliver near-term revenue synergy opportunities. Ericsson also expects to achieve some cost efficiencies following the completion of the transaction. On completion, Vonage will become a wholly owned subsidiary of Ericsson and will continue to operate under its existing name.
Ericsson is committed to its previously-announced financial targets. These include long-term EBITA margins of 15-18%, long-term free cash flow before M&A of 9-12% of sales, and a 2022 target EBIT margin of 12-14% for Ericsson Group, excluding Vonage.
The buyout is expected to be accretive to Ericsson’s earnings per share (excluding non-cash amortization impacts) and free cash flow before M&A from 2024 onward.
The transaction is expected to be completed in the first half of 2022, subject to Vonage’s shareholder approval and customary conditions.
ERIC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Clearfield, Inc. (CLFD - Free Report) is a better-ranked stock in the industry, sporting a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 8.8% upward over the past 30 days.
Clearfield delivered a trailing four-quarter earnings surprise of 50.8%, on average. It has soared 186.7% in the past year.
Qualcomm, Inc. (QCOM - Free Report) , carrying a Zacks Rank #2 (Buy), is another solid pick for investors. The consensus estimate for current-year earnings has been revised 0.5% upward over the past seven days.
Qualcomm delivered a trailing four-quarter earnings surprise of 11.2%, on average. It has gained 28.6% in the past year.