Zoom Buys Five9 for 15 Billion Dollars. What are the Implications?

Zoom has struck its biggest deal yet, will this expensive deal help or hurt the company as employees begin to return to the office?

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Zoom Video Communications Inc has struck a $14.7 billion all-stock deal to buy cloud-based call center operator Five9 Inc in its largest-ever acquisition, as it looks to expand beyond its core video-conferencing services. With Zoom becoming a household name and an investor favorite since the coronavirus pandemic started, it has realized its potential and necessity to keep growing and expanding. With rapid vaccination and life creeping back to normality, analysts and investors are looking to see how Zoom will sustain its hot streak of growth, especially with rivals Microsoft Corp, Cisco Systems Inc, and Alphabet Inc's Google snapping at its heels.

Five9, based in San Ramon, California, makes cloud-based software that uses artificial intelligence to help companies answer questions from customers regardless of language, location, or device. Five9, whose call center software is used by more than 2,000 clients across the globe to interact with their clients, has clients such as Under Armour, Lululemon Athletica Inc, and Olympus Corp. The traditional call center, where a customer service representative responds by phone, has shifted online and is now often powered or augmented by chatbots to help streamline and simplify the process while saving on costs. The market for these cloud-based customer call centers is estimated at $24 billion.

The deal makes strategic sense, as it will help accelerate Zoom's product roadmap outside of its core offering. The communications company is continuing its development and focus on its two-year-old cloud-calling product Zoom Phone and conference-hosting product Zoom Rooms to try and separate itself from its competitors as they attempt to catch up to the giant. This acquisition will help accelerate and improve development in those key areas. Zoom Chief Executive Officer Eric Yuan called Five9 a “natural fit” and said Five9 is complementary to the success of Zoom Phone, the company’s enterprise that replaces traditional company telephone services with modern, cloud-based offerings.

"The acquisition is expected to help enhance Zoom's presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24-billion contact center market," Zoom said in a statement on Sunday.

However, many analysts are speculative about the deal, saying it’s a high price to pay for such a service. According to Neil Campling, an analyst at Mirabaud Securities, “This is a high-priced deal which appears to attempt to build out the Zoom Phone offering. Paying such a high price for a non-differentiated offering smacks of attempts to move into adjacent markets as Zoom fatigue sets in.” With normalcy in our day-to-day lives returning and employees returning to the office, only time will tell if Zoom will be able to continue to grow and develop as steadily as it has during the pandemic. This 15 Billion dollar acquisition, although expensive, will most definitely help to accelerate the growth of the many Zoom side ventures that will benefit the entire corporation.