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What Does FreedomVoice Acquisition Mean For GoDaddy?

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Godaddy Inc (NYSE: GDDY) announced it had inked an agreement to acquire FreedomVoice for $42 million in cash plus up to $5 million in potential future milestones payments. The deal allows GoDaddy to offer cloud telephony services to its SMB customers, JPMorgan’s analysts noted said in a report.

Implications Of The Deal

Offering key solutions required by SMBs is a good way to leverage GoDaddy’s huge customer base. The analysts commented that the telephony technology “occupies a good segment at the low end of the SMB market,” giving GoDaddy the opportunity to expand its presence with ~14M customers in the US and abroad.

The acquisition of strong technology enables the company to build on its existing product and leverage the added value internationally. Moreover, telephony is a is a natural add-on for the company’s core SMB market. GoDaddy has already proved its ability to sell additional services like Office 365 to its SMB customer base.

While RingCentral Inc (NYSE: RNG) is the most notable provider of this technology to SMBs and has a strong franchise, it is better positioned for firms with more than 20 employees. On the other hand, FreedomVoice is more targeted to sole proprietaries and companies with only a couple employees, the JPMorgan report stated.

Initially, the deal may impact GoDaddy’s financials only marginally. The analysts believe the deal would not impact the 2Q16 figures, since there is a 100-day period for regulatory approval on the acquisition. There may be a low-single-digit contribution in revenue after the deal closes. The analysts said, however, that there is significant upsell and cross-sell potential, which represents a substantial opportunity to drive revenue growth.

Posted-In: JPMorganAnalyst Color


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