Verizon Communications Inc said on Thursday it agreed to buy video-conferencing company BlueJeans Network Inc, a rival of Zoom Video Communications Inc for less than $500 million at a time that millions work from home due to widely-enforced lockdowns.
Shelter-in-place orders to contain the spread of the new coronavirus have led businesses across the globe to foster a virtual office environment, leading to a surge in demand for video-conferencing apps such as Zoom, Cisco's Webex and Microsoft's Teams.
|VZ||VERIZON COMMUNICATIONS INC.||32.41||-0.14||-0.43%|
|ZM||ZOOM VIDEO COMMUNICATIONS INC.||69.94||+1.61||+2.36%|
|CSCO||CISCO SYSTEMS INC.||53.76||-0.12||-0.22%|
BlueJeans, whose conferencing app is used in 180 countries, is already a partner of Verizon and its meeting app is offered to clients under the telecom company's unified communications and collaboration services.
"Verizon got a good deal, but BlueJeans had been trying to sell itself for months," Piper Sandler analyst James Fish said. "It wasn't growing as fast as others and had high competition from Zoom, RingCentral, Microsoft, and Cisco."
Zoom, which has a market value of $42 billion, has seen its daily active users jump to 200 million from about 10 million before the pandemic started spreading.
Webex registered a record 324 million attendees in March, with usage more than doubling in the Americas, whereas Teams had 44 million users as of March 18.
BlueJeans, which has not publicly disclosed its user numbers, counts big enterprises such as Facebook Inc, LinkedIn and ViacomCBS among its customers. Large banks like Goldman Sachs and Standard Chartered are also known to use BlueJeans.
However, BlueJeans did not spend as much on product development and customer service as they should have, despite having a big head start over Zoom, Summit Insights Group analyst Jonathan Kees said.
Now with Verizon's deep pockets, Blue Jeans can jumpstart its offerings with heavy investments in research and development, and product integration, Kees said.
Verizon said it would integrate BlueJeans into its 5G product plan, aiming to tap areas such as telemedicine and distance learning.
The deal, first reported by the Wall Street Journal, is expected to close in the second quarter. Evercore and Goodwin Procter were advisers to BlueJeans, and Debevoise & Plimpton was adviser to Verizon.
Shares of Zoom reversed course and were trading down 1 percent Verizon shares were up 0.4 percent at $57.15 at midday.