Get to grips with the arguments for and against the acquisition
Last week, murmurs of an 8×8 takeover by RingCentral set the CX world alight.
After an unnamed source alerted respected finance website Investing.com to the news, many analysts began to weigh up the possibility.
Some suggested that the move could give 8×8 shareholders a chance to escape its decline.
Indeed, the vendor once boasted a market cap of $4BN. Fast-forward to today, and it is $480MN.
Alternatively, some argued that the current share price is obscenely low, given 8×8’s stature in enterprise communications.
Moreover, they pointed to 8×8’s rich product portfolio and large customer base, indicating that 8×8 may prefer to hold firm in anticipation of a bounce back.
From the outside in, it seems a delicate balance. So, let’s take a closer look at the arguments for both.
Both RingCentral and 8×8 have lost 75 percent in their stock value in the last year.
Yet, by acquiring 8×8 and consolidating the market, RingCentral may push back, unlocking cross-selling opportunities and opening the door to share gains.
Such share gains are often challenging in mature markets like enterprise communications.
Furthermore, optimism was in the air after a difficult year during 8×8’s last earnings call, with the business striving to strike the right balance between growth and profitability.
Samuel Wilson, Chief Financial Officer at 8×8, doubled down on its aim to achieve a 10 percent growth in profitability in its 2024 fiscal year. During an earnings call, he stated:
We’re not giving up on our goal of being a double-digit grower… If we were really focused on being a single digit grower, we would probably reduce our R&D spending, and we’re not.
If it is really on track to meet this target, RingCentral will onboard a potentially profitable company.
Finally, by acquiring 8×8, RingCentral gains a native CCaaS solution – and can converge this with its UCaaS platform to seize upon a burgeoning market trend.
Of course, RingCentral is already big on CCaaS. Yet, it currently resells NICE CXone, so it only takes a small slice of the business it generates. By selling a native CCaaS solution, RingCentral can seize more and grow its contact center profits.
Is RingCentral in a position to grow? This was likely top of mind for many after the news broke.
After all, its operating margins have tightened, causing the company to lay off ten percent of its workforce earlier this month – aiming to enhance efficiencies within the business.
Additionally, 8×8 has debts of its own, and RingCentral will have to maintain more platforms should the acquisition go through – adding further costs.
Alternatively, some will argue that RingCentral does not need acquisitions to resurrect its growth.
Indeed, most enterprises still harness legacy tools. An uptick in cloud migrations – which seems on the cards – will facilitate revenue rises through a deeper addressable market.
Finally, some may caution against damaging ties with NICE and going out alone in the CCaaS space. After all, many analysts – including Gartner – position NICE at the forefront of the market, meaning that RingCentral can offer its clients the crème de la crème of CCaaS.
While 8×8’s solution is also advanced, this could perhaps be a stumbling block for many.
Unfortunately, RingCentral does not dabble in time machines. If it did, it would likely rewind the clock, make an overvalued stock offer for 8×8, and roll up the vendor at a significantly reduced rate.
Nevertheless, the incentive is still there for RingCentral to gain a CCaaS solution, cross-sell, and attempt to raise its stock price.
Yet, it is only one option available in the suffocated communication space.
As such, it is likely that RingCentral is only assessing its options, considering how it can increase share prices, and evaluating the possibility of securing a bargain.
Indeed, the major acquisition is not yet in the pipeline and seems unlikely to happen any time soon.
However, any deal – or movement like this – is fascinating to explore to telegraph the future of CX innovation.
Fianlly, expect more rumblings like this across the customer experience space, as consolidation within the crowded market is likely.