Vocalocity Acquired by Vonage

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| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Vocalocity Acquired by Vonage

Rich Tehrani has a good analysis of Vonage finally getting in the B2B space by acquiring Vocalocity. Vonage is acquiring Vocalocity for "$130 million, including $105 million in cash and $25 million in Vonage common stock."

It is interesting to note that Vocalocity was on schedule to hit $56 million in annual revenue this year. That makes this buy 2.3x revenue. M5 had $58M in revenue and sold to ShoreTel for $146M. Of course, Vocalocity is different revenue that M5 - M5 had 2000 enterprise accounts with ARPU above $2000 per month. Vocalocity has business accounts with fewer than 20 employees - which fits with how Vonage fits in the market.

Vonage is on pace to break $800M in revenue this year. With Vocalocity it will be at $900M, which should scare competitors like RingCentral and 8x8. Surprisedly, 8x8's stock didn't jump with this acquisition, which is strange because I thought someone would have scooped them up by now. My bet was TWC would buy 8x8, but Rich Tehrani thinks that it is more likely that PBX vendors will buy Hosted VoIP companies. I don't know. It's a big pivot to go from hardware vendor to service provider. And ShoreTel is still a hardware vendor - way more than a service provider.

This Hosted VoIP space isn't easy (or profitable). After two mergers, $13 million in funding and 8 years, Vocalocity got to $56 mill. 8x8 just took in another $30M in equity funding on top of about $65 million in previous funding to get to $120 million in revenue. RingCentral has more than $44 mill in funding since 2003 plus about $95 mill from an IPO from last month to make $120 million in revenue - but no profit!! Nothing but losses. That is the trouble with this whole VoIP business: looks good on paper, execution for profit is just terrible.

Vocalocity received $9.5 million in series C funding backed byTechOperators LLC, Imlay Investments Inc. and Noro-Moseley Partners LLC. (I bet champagne is popping in those offices.) CrunchBase says that the total funding was $13.6 mill. The company also merged with Aptela in 2011. No word on what happens to the 200 employees in Atlanta.

For all the bluster of UC, cloud comms, UCaaS and the other terms, very feew companies have been able to execute on a profitable sales model. Vonage, Vocalocity, 8x8, RC and others automate as much as possible, know their numbers, and don't worry about quality of service because they can't really control it. So churn is high and your branding takes a hit. But even the big boys who sell over MPLS can't figure out how to keep the machine growing. Maybe you can't. Maybe it is all mobile phones and that's it. Maybe getting to BPI and productivity is just too expensive, time consuming and elusive.

This sale will not be met by the Cloud Comm Alliance with champagne; probably be drinking bourbon in San Diego as they realize that the multiples are shrinking and the prospective buyers are dwindling too.



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