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What Do Bankers Have to do with it?

Last year, 8x8 hired bankers to perform due diligence about a reported buy-out. 8x8 wanted $1.2B+ and the buyer (reportedly Oracle) walked away.

RingCentral just hired bankers after a reported buy-out attempt supposedly by Google and/or Amazon.

 RC and 8x8 have a lot in common - they are both publicly traded pure play UC providers. Most of the UC providers are private - Fuze, Panterra, Jive, Evolve IP, etc. They are both ready to cash out.

Both also have to spend tremendously to keep the organic growth engine of sales rolling along. It started to slow down over the last two quarters but that may be due to not spending every sixty cents made on marketing efforts.

Think about the RNG Market cap of almost $3B. With Revenue of almost $400M, how many years would the ROI be on that?

Their biggest competitor is status quo. A business who rides out the premise PBX or switches to SIP Trunks instead of a pure cloud play.

Certainly Avaya's bankruptcy, Shoretel's sale and Toshiba's exit are bright indicators that the premise PBX is waning. It just isn't happening fast enough.

The alternatives vary depending on the business size and type. Some businesses are just switching to another PBX - ala 3CX/Freeswitch/FreePBX/Asterisk/Switchvox. Some are going all mobile, since the VZW One Talk marketing pitch is quiet. Some use Slack or Hipchat or some other collab platform. Amazon Chime partnering with Vonage and Level3 added some chum to the water as well.

But really one spoiler for the UCaaS provider is Google for Work with 5 million businesses (many of whom are Fortune 5000). Cisco is trying to make Spark happen.

William Blair is bullish on Microsoft. Skype4B is closing the feature gap, adding a voice SLA and surprise "Microsoft is now a fully regulated CLEC in the United States (offering local number portability, lawful intercept, E911)".  Skype4B is a $1B business for MS with nearly 50 million Office 365 active business users, and 100 million Skype for Business users. Even Mitel's fluffed up number of 3.2 million seats pales in comparison.

There are too many providers and they all look about the same to the buyer (and to the channel) feature wise. Price is negotiable especially when you get past 50 seats. Moreso after 100 and 500.

Consolidation doesn't work with a 6x multiple of revenue. Investors ask, "How sticky are these customers?"

It will be of interest IF either RC or 8x8 get acquired. Bankers love the idea. Other UCaaS providers like that idea. It gives them an idea about valuation - and takes a competitor off the table for a little while. Bankers are the ones driving this. They only get paid big commissions on M&A. Or they make money in an advisor capacity.


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