Ericsson to buy cloud firm Vonage for $6.2 bln

Ericsson has agreed to buy Vonage Holdings Corp. in the U.S. for an enterprise value of $6.2 billion as it strives to build market presence in cloud communications services.

The Swedish telecommunications group will pay $21 per share for Vonage using existing cash, according to a statement Monday. The offer represents an equity value of about $5.3 billion based on some 252 million shares outstanding.

Ericsson’s push into cloud-based services comes at a time as its earnings have been hampered by both lost business in China and component shortages from a global supply-chain squeeze. The company said on Monday that it remains fully committed to its long-term Ebita margin target of 15-18%.

“Vonage gives us a platform to help our customers monetize the investments in the network, benefiting developers and businesses,” said Ericsson’s Chief Executive Office Borje Ekholm.

The U.S. company’s cloud-based communications platform accounts for 80% of its $1.4 billion annual revenues and enables developers to embed services such as messaging or video into their products. That customer base and developer community is seen as a key draw for Ericsson.

Vonage itself had been under pressure from activist investor Jana Partners and was working with advisers to run a strategic review of the business. That review included the possibility of a full sale of the company, Bloomberg News reported in September.