Last week, Ericsson announced a Vonage impairment charge of $1.1BN. That follows a $2.92BN charge in November 2023.
Impairment accounting estimates an investment's market value. So, when a company reports an impairment charge on an investment, it means that its value has dropped by the specific amount in the charge.
As such, by totaling the two charges, Vonage’s value has dropped by $4.02BN.
In addition, given that Ericsson acquired Vonage for $6.2BN, the networking giant appears to have lost almost 65 percent of its original investment.
The news comes after Vonage announced a five percent decline in overall revenue year-over-year (YoY) in April and reduced its operations "in some countries."
At the time, Borje Ekholm, CEO of Ericsson, stated:
The group (Vonage) is trending well behind your and our initial expectations.
So, what has gone wrong, and what comes next?
The Ericsson-Vonage Acquisition: 2 Years On
In acquiring Vonage, Ericsson acquired three core solutions: a CPaaS, CCaaS, and UCaaS platform.
Ericsson bought Vonage primarily for its CPaaS APIs. After all, that element of Vonage’s business aligns well with Ericsson’s core technology for mobile operators.
As such, Ericsson has made some exciting moves with Vonage CPaaS, like combining those APIs with its 5G networks to deliver a Global Network Platform.
Through the platform, enterprises can embed 5G capabilities – including speed, latency, and Quality on Demand – within their apps and processes.
That's big for many CPaaS buyers. Yet, two years later, not much has happened from a CCaaS and UCaaS perspective.
Of course, the product team could soon leverage the Global Network Platform APIs on the back-end of the UCaaS and CCaaS solutions to better manage the network experience. That would enhance the mobility of Vonage's enterprise communications systems.
However, while mobility is excellent, it’s not a core deal winner within the comms space.
Meanwhile, since Ericsson first considered acquiring Vonage, a lot has changed in the UCaaS and CCaaS markets.
Speaking to CX Today, Rob Kurver, Founding Partner of the CPaaS Acceleration Alliance, said: "UCaaS has become commoditized over the last couple of years after Microsoft – more or less – won the pandemic. So, what do you do there?
Then, there’s the CCaaS part that has an interesting proposition, but it’s strange for Ericsson to be in the market, competing with their customers.
Perhaps Ericsson thought it could sell the CCaaS arm, as many anticipated – and still expect - significant consolidation within the space.
Yet, it raises a billion-dollar question: why didn’t Ericsson roll up a pureplay CPaaS provider instead?