Cisco To Acquire Voicea For Videoconferencing Tech

Quick TakeCisco Systems (CSCO) announced it has intent to acquire Voicea for an undisclosed amount.

Voicea has developed EVA, an Enterprise Voice Assistant that records important highlights and provides other artificially intelligent capabilities for online meetings.

CSCO is acquiring Voicea to integrate its AI and machine learning technologies as part of its Cognitive Collaboration initiatives across the enterprise.

Target CompanyMenlo Park, California-based Voicea was founded in 2016 to develop EVA, a voice assistant that is capable of joining meetings, taking notes, identifies action items, and delivering insight to the right teams for the job.

Management is headed by Founder and CEO Omar Tawakol, who was previously SVP, GM Oracle Data Cloud at Oracle (ORCL).

Below is an overview video of Voicea’s EVA offering:

Source: Voicea

Investors have invested at least $20 million in the company and include e.ventures, GV (GOOG) (NASDAQ:GOOGL), Cisco, M12 (MSFT), Battery Ventures, Mindset Ventures, Salesforce Ventures (CRM), and GGV Capital among others (Source: Crunchbase).

Market & CompetitionAccording to a market research report by Grand View Research, the global video conference [VC] market was valued at $3.4 billion in 2017 and is projected to reach $6.7 billion by 2025.

This represents a forecasted CAGR of 9.2% between 2018 and 2025.

The main drivers for this expected growth are the increasing demand for video conferencing solutions from startups due to a rise in globalization of businesses, geographically-scattered operations, and remote workforce management.

Various communication solutions rely on video conferencing solutions, such as telemedicine and online education, and are being increasingly used in developing countries in the Asia-Pacific region, consequently propelling the VC market.

Additional factors driving market growth include an increasing adoption in cloud-based communication technologies, small and medium enterprises’ focus on cost-reduction and performance improvement.

The market can be segmented by deployment type into on-premise and cloud, of which the on-premise sector accounted for the largest market share in 2017 while the cloud is anticipated to grow at a CAGR of 10.8% during the period.

The Asia-Pacific region is projected to grow at a CAGR of 10.5% primarily due to the increasing number of technology and service-based startups in the countries of India and China.

Major vendors that provide video conferencing solutions include:

• Adobe (ADBE)
• Avaya (OTC:AVYA)
• Huawei (SHE:002502)
• Logitech [SWX:LOGN]
• Microsoft
• Polycom (NYSE:PLT)
• Vidyo (TSE:ENGH)
• West Corporation
• Zoom Video (OTC:ZOOM)
• LogMeIn (LOGM)

Source: Sentieo

Acquisition Terms and FinancialCisco didn’t disclose the acquisition price or terms and didn’t file a form 8-K or provide a change in financial guidance, so the deal was likely for a financially non-material amount.

A review of the firm’s most recent 10-Q filing indicates that as of April 27, 2019, CSCO had $34.6 billion in cash and investments and $60.5 billion in total liabilities, of which long-term debt represented $15.9 billion.

Free cash flow for the nine months ended April 27, 2019, was $11.2 billion.

In the past 12 months, CSCO’s stock price has risen 19.8% vs. the U.S. Communications industry’s rise of 10.0% and the broader overall U.S. market’s rise of 0.9%, as the chart below indicates:

Source: Simply Wall Street

Earnings surprises have been positive for all of the last twelve quarters, as shown in the chart below:

Source: Seeking Alpha

Analyst sentiment in recent earnings calls has gradually dropped to below even against a baseline, per the linguistic analysis shown here:

Source: Sentieo

CommentaryAfter investing in Voicea, Cisco is acquiring the firm to bolster its WebEx videoconferencing offering with more advanced voice-based functionalities.

As Cisco stated in the deal announcement,

With Voicea technology, Cisco will enhance its Webex portfolio of products with a powerful transcription service that blends AI and Automated Speech Recognition [ASR] to unlock the power of any collaboration, like meetings and calls. Our first focus with Voicea is to turn meetings into a treasure trove of digital meeting notes and insights.

Cisco is planning to integrate Voicea as part of its Cognitive Collaboration initiative, which seeks to infuse its enterprise-facing offerings with artificial intelligence-enhanced capabilities to improve their value.

Cisco says that ‘more than 130 million people use WebEx per month.’ The deal won’t move CSCO’s stock price but it shows management’s continued M&A appetite to acquire the technologies that it can quickly integrate into its existing product roadmap to accelerate functionality improvement, especially in the AI and machine learning areas, which are undergoing rapid development.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.