Shares of RingCentral and Avaya Holdings are soaring today after the announcement that RingCentral will become Avaya's exclusive Unified Communications as a Service (UCaaS) solutions provider.
Yesterday afternoon after the markets closed, RingCentral Inc. (RNG:NYSE) which identifies itself as a leading provider of global enterprise cloud communications, collaboration, and contact center solutions, announced that it will enter into a commercial agreement with Avaya Holdings Corp. (AVYA:NYSE), a global solutions leader that enhances and simplifies communications and collaboration, making it the exclusive provider of Unified Communications as a Service (UCaaS) solutions to Avaya. The company reported that together with Avaya it will introduce a new solution, "Avaya Cloud Office by RingCentral," and that the two companies will jointly develop programs to leverage Avaya's global sales and partner network, as well as build automated technologies for seamless customer transition to RingCentral's leading global UCaaS solution.
The report outlined that under the commercial agreement, both companies will contribute resources toward development and sales and marketing of Avaya Cloud Office. RingCentral will pay Avaya an advance of $375 million, predominantly for future commissions, as well as certain licensing rights which will be paid primarily in stock. In addition, RingCentral will also purchase $125 million aggregate principal amount of 3% convertible and redeemable preferred stock, obtaining approximately a 6% position in Avaya on an as-converted basis.
RingCentral advised that this agreement does not require shareholder vote of either company, is subject to customary regulatory approvals, and is expected to close in Q4/19, and that the Board of Directors of both companies have unanimously approved the transaction.
Founder, chairman and CEO of RingCentral Vlad Shmunis commented, "This strategic partnership leverages the respective strengths of Avaya and RingCentral to provide a definitive differentiated solution...We are excited to bring RingCentral's leading UCaaS platform to Avaya's installed base of over 100 million users and over 4,700 partners, providing long-term growth opportunities for both our companies".
Jim Chirico, president and CEO of Avaya, added, "Avaya and RingCentral's joint investment and commitment to bringing Avaya Cloud Office to market creates an unprecedented opportunity to accelerate the transition to the cloud with attractive economics for our customers and partners...This also gives us the opportunity to unlock value from a largely unmonetized base of our business as it brings compelling value to our customers and partners. We believe this highly complementary partnership is a game changer that expands the total addressable market for Avaya and creates meaningful value for both Avaya and RingCentral."
RingCentral is headquartered in Belmont, Calif., and describes itself as a leading provider of global enterprise cloud communications, collaboration and contact center solutions. The firm claims that its RingCentral platform "empowers employees to work better together, from any location, on any device, and via any mode to serve customers, improving business efficiency and customer satisfaction. The company provides unified voice, video meetings, team messaging, digital customer engagement, and integrated contact center solutions for enterprises globally."
Avaya is based in Santa Clara, Calif., and states that it builds "open, converged and innovative solutions to enhance and simplify communications and collaboration in the cloud, on premise or a hybrid of both." The company operates through two segments: Products & Solutions, which develops, markets and sells unified communications and contact center solutions, offered on premises, in the cloud, or as a hybrid solution; and Services which develops, markets and sells end-to-end global service offerings that enable customers to evaluate, plan, design, implement, monitor, manage and optimize enterprise communications networks.
RingCentral has a market capitalization of approximately $10.6 billion and Avaya's is about $1.1 billion. Shares of both companies opened higher today on the news of the collaboration agreement and have traded nearly 25% higher throughout the first half of the trading day.
RNG shares opened today at $145.29 (+$17.75, +13.92%) compared to Thursday's $127.54 closing price. The stock has traded today between $145.01 and $169.58/share and at present is trading at $161.69 (+$34.15, +26.78%).
AVYA shares opened this morning at $11.90 (+$1.78, +17.59%) compared to yesterday's closing price of $10.12. The stock has traded today between $11.79 and $13.00/share and currently is trading at $13.07 (+$2.95, +29.05%).
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