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Verizon plans to acquire struggling Zoom competitor Blue Jeans Network Inc. and use its video conferencing technology to launch telemedicine and remote learning services.
The announcement came as a surprise to some industry observers because Verizon already resells the telecommunications and collaboration products of Cisco and Zoom.
Verizon said it would pair BlueJeans with its 5G wireless network to develop applications for industries such as healthcare, education and field services. But some analysts are skeptical that the carrier will be able to make the deal a success.
Verizon has a poor track record on acquisitions, said Patrick Moorhead, president of Moor Insights & Strategy. Moorhead pointed to Verizon's purchases of Yahoo in 2017 and AOL Inc. in 2015.
Those acquisitions were not well thought out and "far from successful," Moorhead said. "The biggest issue is timing. Verizon tends to buy companies in distress behind the curve [rather than] buying ahead of the trend."
This acquisition comes after BlueJeans laid off a significant percentage of its workforce to start making a profit. In December, the company let go of roughly 40% of its employees, Business Insider reported. The company now has 390 workers.
Verizon will pay less than $500 million for the Zoom competitor, according to BlueJeans co-founder Krish Ramakrishnan. Verizon declined to provide exact terms of the deal. BlueJeans generated more than $100 million in annually recurring revenue in the fiscal year that ended Jan. 31, 2019.
"It's a great deal for BlueJeans investors, but its customers should be concerned about Verizon's history of acquisition fumbles," said Dave Michels, principal analyst at TalkingPointz.
Sowmyanarayan Sampath, president of Verizon's global enterprise division, said the purchase of BlueJeans would be different from past ventures. Verizon is very familiar with the kind of technology it's acquiring this time. The company also learned lessons from previous deals that did not turn out as planned, he said.
"This is completely core to our mission of communication," Sampath said.
BlueJeans under Verizon
BlueJeans and Verizon began acquisition talks in the fall, Ramakrishnan, the BlueJeans co-founder, said. In October 2019, the two companies teamed up to let businesses run BlueJeans on Verizon mobile networks in conference rooms.
Toward the end of 2019, Verizon also began bundling BlueJeans with some sales of Verizon One Talk, a telephony product for small and midsize businesses. Verizon built the service using Cisco's BroadSoft technology. Once the acquisition closes, Verizon will build links between the interfaces of the two products.
Verizon also plans to integrate BlueJeans with its 5G network to support telemedicine, which requires low-latency connections. Similarly, the company wants to find ways to get more teachers and field service workers to start using the product. Meanwhile, Verizon's partnerships with Cisco and Zoom will continue for now.
"The idea is to take BlueJeans video technology and embed it in as many applications that we can," Ramakrishnan said. There are no plans to do away with the BlueJeans brand, he said. But that could happen down the road.
The acquisition once again demonstrates how difficult it has become for communications vendors to survive on their own without providing a full suite of apps.
Video conferencing providers like Cisco, Microsoft, LogMeIn and Zoom have taken steps in recent years to package their meeting services with apps for calling and messaging.
Several vendors that exclusively provided video services were acquired over the same time frame, Michels, the TalkingPointz analyst, said. That includes TokBox, Biba and Vidyo. Most recently, Lifesize merged with contact center vendor Serenova.
BlueJeans also sells an interoperability service that lets businesses connect third-party video devices to Microsoft Teams and Skype for Business. The technology is impressive, but a new standard for internet communications known as WebRTC will make the product less valuable over time, Michels said.
BlueJeans vs. Zoom
Zoom competitor BlueJeans failed to keep pace with its rival in part because it lacked a free offering to attract consumers and small teams of workers, said Irwin Lazar, analyst at Nemertes Research. BlueJeans also did not develop an ecosystem of hardware partners as quickly as Zoom.
"They went after larger enterprises and they sold it ... as something you have to work through a salesperson to buy," Lazar said. "As Zoom took off, BlueJeans never really had an effective mitigation strategy."
Ramakrishnan said BlueJeans decided to go after companywide deployments at multinational corporations by making things like interoperability and security a priority.
"That's really why we have not been able to grow as fast as Zoom," Ramakrishnan said. Nevertheless, the company has attracted 15,000 customers, including major brands like Facebook, Viacom and ADP. It has not disclosed total users.
Zoom is currently valued at more than $42 billion. The company had 81,900 customers as of Jan. 31, but likely has many more than that now. However, Zoom's success has also revealed shortcomings in its security and privacy practices.
Verizon expects to close the BlueJeans deal in the second quarter. The Wall Street Journal was the first to report details of the transaction.