8x8 In Play?
In the latest news spinning out of the UC&C rumor mill, StreetInsider.com reported late last week that 8x8 is looking around for a buyer -- speculation that received an official no comment from the UCaaS provider's management team when No Jitter reached out regarding the piece.
This is not the first time such speculation has arisen about 8x8, as the same sort of story surfaced late last year. Note this Dec. 21, 2016, tweet from Frost & Sullivan UC analyst Elka Popova:
— Elka Popova (@epopova) December 21, 2016
With renewed speculation, I touched base with Popova for her insight. While Popova had not spoken with 8x8 as of her response to me, she did mention that last time she'd heard a sale rumor 8x8 implied to her that it had considered a one-off offer. "This article seems to indicate that 8x8 is exploring a sale in earnest," she said.
If StreetInsider.com has its facts straight, then that is likely the case. Citing "people familiar with the matter," StreetInsider.com reported that 8x8 has retained Morgan Stanley to "field interest from other companies and private equity firms." For what it's worth, I see that 8x8 CEO Vik Verma and CFO Mary Ellen Genovese are set to give a presentation this Wednesday, March 1, at the Morgan Stanley Technology, Media & Telecom Conference.
While Popova said she has no details beyond what's been said publically, she offered some guidance on how to think about such a potential move by 8x8. Popova echoed the StreetInsider.com article's suggestion that UCaaS providers are looking for scale -- and noted that mergers and acquisitions can help them achieve that. As recent examples, she pointed to last week's announcement by NetFortris that it had acquired Fonality, and the year-ago move by TelePacific Communications to purchase DSCI.
"M&As provide various benefits: technology know-how, geographic expansion, sheer size (staff,
revenues), market share, etc. Depending on growth vision, providers may engage in M&A domestically or internationally, vertically (e.g., acquiring resellers, suppliers) or horizontally (acquiring competitors). An M&A can also be an out for founders looking to move on to other projects," Popova said.
Also catch Popova at Enterprise Connect 2017, coming March 27 to 30 in Orlando, Fla.," for her session, "Where is the UCaaS Industry Headed?"
8x8 stands on solid financial footing, Popova noted, making it a "desirable acquisition target." For its most recent filing (Q3 fiscal 2017, ended Dec. 31, 2016), for example, 8x8 reported that its service revenue grew 23% year over year (YOY) to $60.1 million, with total revenue of $63.7 million, a 20% growth YOY.
Additionally, Popova said, 8x8 should be attractive to buyers because it "uses its own technology (hence has greater control on variable costs and no dependence on third-party innovation cycles), its portfolio is well diversified in terms of UCC and contact center, it has created international presence and developed a partner ecosystem, and it holds one of the largest shares in the [North America] market -- all key success factors in the UCaaS market."
While Popova said she has previously speculated that "8x8 could be a good fit for a PBX vendor
that has not yet created a strong UCaaS solution/portfolio," she said such a scenario no longer seems as likely. Rather, she said, "I believe [8x8] is a good fit for a SaaS company looking to add a real-time communications element to its portfolio."
She threw out Salesforce, SAP, Slack, and Oracle as some potential candidates in "entirely random speculation" meant "only to illustrate the type of company I see a fit with." In addition, consumer SaaS or VoIP companies may be interested in acquiring 8x8 to gain presence in business communications, or "even an IaaS company (e.g., Amazon) may find 8x8 a good fit in a portfolio diversification strategy."
Learn more about cloud communications trends and technologies at Enterprise Connect 2017, March 27 to 30, in Orlando, Fla. View the Cloud Communications track, and register now using the code NOJITTER to receive $300 off an Entire Event or Tue-Thu Conference pass, or get a free Expo Plus pass.