On Monday, December 4th, Bloomberg news service published a story about contact center vendor Five9, exploring a sale to Zoom. After that article, financial content service SeekingAlpha authored a story that Zoom was not interested in rekindling the relationship that almost happened two years ago. So, what’s the truth? Neither company is talking: I asked both for comments and got back “no comment,” so for now, one can only speculate.
Is Five9 shopping itself? As the expression goes, where there is smoke, there is fire. A follow-up story on Bloomberg confirmed that Five9 did have discussions, although it is not pursuing a transaction. Understand that these are publicly traded companies, so the CEO is responsible to the shareholders. If Five9 offered some outrageous price, the shareholders would push for it. Similarly, if Zoom can acquire an asset at a bargain to help its stock price, its shareholders would push for that deal. I'm guessing one party asked for too much, and the other side offered too little, so the talks went nowhere.
Zoom buying Five9 makes little sense right now. From Zoom’s perspective, the company just rolled out its contact center solution, and all indications are that it’s having early success. If that’s the case, it would seem like a waste to spend years building an in-house solution only to toss it aside or duplicate the effort with an acquisition. Also, I said this at the time, and it’s still true, but Zoom’s CEO, Eric Yuan, is a builder of products. Typical acquisitions for Zoom are smaller technology tuck-ins rather than bigger, finished products. When the deal fell apart, I got the feeling that neither side was all that upset about it, as the closer it got to closing, the less it seemed like a great fit.
For Five9, the CCaaS industry is in a secular downturn, with all the companies having significantly lower valuations than during the pandemic. Expecting the stocks to return to that pre-pandemic level is unrealistic, but there is room to grow. Also, the CCaaS industry is at an inflection point where the infusion of AI will generate more economic value for everyone and create share-stealing opportunities. Whenever I’ve talked to Five9 management about the AI opportunity, they are extremely bullish on AI and believe it will be a catalyst for the next wave of growth. Unless something had changed in Five9’s belief in its product and/or the market outlook, and I do not think that’s the case, Five9 would be selling from a position of weakness, and Mike Burkland is far too good a CEO to do that. Also, the company brought in Niki Hall as CMO to drive more sales, and she hasn’t even begun to have an impact.
But let’s play the “what if” game. Who would be the buyer if Five9 is looking for a buyer and Zoom is not interested in it? Below are some candidates.
Microsoft is the most logical acquirer. The company has oodles of cash plus a large and growing footprint with its Teams product. It doesn’t have its own contact center product, which is a bit surprising. It could roll in Copilot to enhance the contact center product’s functionality and quickly infuse generative AI into Five9. Microsoft’s CRM solution, Dynamics, like many Microsoft products, is a “good enough” offering, and tying it to a market-leading product like Five9 could give it a shot in the arm. The company could also move Five9 wholly to Azure (it runs on a mix of cloud providers today), which would spin the Azure meter more, which is ultimately what Microsoft is all about. Microsoft makes sense as an acquirer, and I’m a bit surprised it hasn’t bought a CCaaS provider yet. Microsoft has been focused more on employee experience (EX) than CX. Not having its own contact center is huge if it wants to get serious about the latter.
If not Microsoft, what about the other hyperscalers? Amazon is a hard no. Its Amazon Connect product is rolling; it just made its way into the leader quadrant of the MQ, and the AI trend favors it perhaps better than anyone. Google is interesting as it does play in the UCaaS space and, like Microsoft, is missing CCaaS, although does partner in this area. The challenge with Google is that everything they do in the enterprise is half-baked. I’ve accused Microsoft of rolling out “good enough” products, but Google’s are barely good enough. Google Meet is OK, not great but better than nothing. Google Workspace has been on the verge of challenging Microsoft Office for decades, but they can’t seem to close the feature gap. If they had a desire to be in Contact Center, they could have bought partner UJet by now. Being in the contact center space requires a commitment to excellence, and Google has never had that.
Another name bandied about is Salesforce because CRM and CCaaS are tied at the hip. In fact, many customers launch Five9 directly from the Salesforce dashboard. However, despite the synergies, it doesn’t make sense for the CRM leader to buy Five9. Currently, all contact center vendors prioritize interoperability with Salesforce, making the entire industry a channel for them. If Salesforce were to acquire one of them, it would alienate the rest of the field and push contact center vendors to another CRM vendor like Dynamics. This could infuse life into Dynamics and create a much stronger competitor. Salesforce best tactic is to stay contact center neutral.
Cisco is another rumored suitor for Five9, and that might have made sense two years ago, but not today. Under the leadership of EVP Jeetu Patel and SVP Javed Khan, Webex took the time to build a CCaaS solution from the ground up that’s cloud-native and leveraged all the best parts of Webex. At its recent WebexOne event, it rolled out many AI features and will lean on those for differentiation. When I talk to Webex leadership about its opportunity in contact center, they’re as giddy as a teen at a Taylor Swift concert.
Oracle is an interesting possibility, as the company has danced around communications for years but has consistently flopped. It does have a hodgepodge of communications products such as a session border controller, communications broker, session delivery manager and other infrastructure – but no communications apps. Five9 would give them that.
If an acquirer comes for Five9, other than Microsoft, I believe it will be something out of left field, like Adobe. The world of CX is both broad and diverse, and no company can address all aspects of it. As companies look for adjacent opportunities, this stimulates M&A activity as everyone wants a bigger piece of the largest possible pie. In CX, Adobe addresses the front end of the customer journey, specifically sales and marketing, and Five9, the back end, where service is done.AII-driven companies are fueled by data, and right now, Adobe and Five9 each have portions of CX data. Buying Five9 could create an interesting company that can see the entire customer journey – from first contact through service. We are very early in tAI AI cycle so M&A like this would be premature but perhaps down the road it would make sense.
In summary, Five9 may be looking for a buyer, but I do not think that’s the case for all the reasons I listed above, as the timing seems off. If the company is successful with its AI strategy, it could see its valuation spike. With that being said, if a massive offer is made, the company would have to do what’s in the best interest of the shareholders. We shall see!
