Today’s Cache dissects big themes at the intersection of technology, business and policy. Written by John Xavier, tech news lead at The Hindu
A multi-billion-dollar deal is under review over China ties
Videoconferencing app Zoom became a household name during the pandemic. It came in handy for both ordinary users and businesses as it let them stay connected during lockdowns via their phones or computers.
Slowly, other players bit into Zoom’s market with their apps. Google offered its business and individual users a videoconferencing app for free, drawing a sizeable portion of users under its fold. Then, Microsoft lured away some others with Teams app that enabled enterprise users to stay connected. And lastly, WhatsApp stuck its position as the app for all seasons and reasons.
As the world of video chatting apps changed, not only did Zoom’s app installs rise and plateau, the company’s share price surged and ebbed. Its stock hit an all-time high of $559 a piece in October 2020, and then dropped down to under $300 this year. Users, in general, started to show signs of withdrawal from video-chatting apps.
Zoom is now working on extending its automatic closed captioning feature to 30 languages, as well as adding live translation to 12 languages in the next year, it noted in a blog post.
It was time to rethink the next phase of growth for the U.S.-based firm with an extremely good balance sheet position. In the first quarter of this fiscal year, Zoom had nearly $5 billion in short-term investments and cash. Perhaps, that’s why CEO Eric Yuan went shopping to strategically build the next phase of his company.
The outing led to a $14.7 billion deal to buy Five9, a cloud-based call centre business. According to Yuan, the acquisition would create “a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers”.
But the deal now hangs in the balance. Not because of Five9 or Zoom, but because the U.S. government thinks the deal could potentially pose a national security risk. The country’s Justice Department sees possible foreign relationships and ownership connected to the deal. In short, it sees Zoom having some ties with China.
The review by the interagency committee means the deal could get delayed, and that Zoom could get in the crosshairs of both U.S. and China. The action by the agency comes at a time when Zoom’s sales guidance came in lower than expected as individual customers and small businesses are starting to cut down their spending on the service. This in turn could reduce its cash balance, much needed to buy the call centre business.
(This column was emailed on September 24.)
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