BroadSoft, the Gaithersburg, Md.-based company that handles the cloud-based software used to manage call conferencing, announced Monday that it is being sold to California-based telecommunications giant Cisco as both companies seek to harness the changes brought by cloud computing.
The $1.9 billion deal represents a 2 percent premium over Friday’s closing stock price. The transaction is scheduled to close in the first half of 2018. The offer price is more than 25 percent higher than where BroadSoft shares were trading before Reuters reported Aug. 30 that the company was exploring a potential sale.
Executives described the combination as a step to focus on group teleconferencing services, an expansion beyond the traditional routing hardware Cisco is best known for. Cisco has been building out its WebEx videoconferencing service for large businesses in recent years.
“We’ve seen firsthand how the agile workforce of today is transforming how work gets done, whether that’s virtually, on the move or in their physical work environments,” Cisco Senior Vice President Roland Acra said in a call with investors. “Our customers expect the tools from Cisco that will enable them to continue that transition.”
Cloud computing technology, and the often cheaper global calling and videoconferencing it enables, has been a significant opportunity for traditional telecommunications companies.
Microsoft, one of Cisco’s close competitors in the business conference-call space, recently announced that it would end its Skype for Business offering in favor of a new product called Microsoft Teams. Microsoft bought Skype for $8.5 billion in 2011 when it was a market-dominating consumer videoconferencing app.
Since then, the market for business-focused online collaboration tools has exploded, with companies such as Slack, Google and Facebook competing for market share.
In a call with investors Monday, Cisco executives said the combination with BroadSoft would give the company a stronger hand as it competes with Microsoft.
Microsoft has “run into a brick wall with BroadSoft, frankly, at the lower end of their business,” said Rowan Trollope, a senior vice president at Cisco.
For BroadSoft, the deal brings one of the Washington area’s biggest exits in recent memory. BroadSoft was founded in 1998 by two telecommunications executives and quickly built a software business targeting cable providers and phone carriers. In recent years, the company has tacked on new acquisitions in the Internet phone service industry, acquiring local start-ups Leonid Systems and mPortal.