This morning Microsoft announced that they had entered into a definitive agreement to acquire Metaswitch. Metaswitch CEO Martin Lund has also shared an announcement about the deal.
There’s very little information available at this stage, and – to be clear – the deal has not yet closed, but I have some initial analysis.
Why is Microsoft buying Metaswitch?
If you read the announcement text, it’s clear that the cloud and 5G are the focus.
- The title of the Microsoft announcement says that this deal will help “deliver on [the] promise of 5G”.
- The Microsoft announcement was made by Yousef Khalidi, the Corporate Vice President of Azure Networking – so it seems like it’s the Azure group (Microsoft’s cloud platform) that is leading the acquisition.
- This acquisition is described as “building on our recent acquisition of Affirmed Networks”, who offer “fully virtualized cloud-native solutions for the mobile industry”.
- Metaswitch is described as having a “complementary portfolio of ultra-high-performance, cloud-native communications software will expand our [Microsoft’s] range of offerings available for the telecommunications industry.”
How much did Microsoft pay for Metaswitch?
Sadly this has not been announced. It’s possible that maybe the final amount is still to be determined, during the closing process.
Update: In July 2020 (after the deal was finalized) Microsoft filed a financial disclosure reporting that they had issued $270M in additional stock which formed a portion of the purchase price for Metaswitch. So the purchase price is more than $270M, but that’s all that has been shared publicly.
What’s the timeline from here?
No official timeline was announced. Metaswitch said that after today’s agreement “both companies will now move down the path of officially closing this transaction.”
It’s interesting to note that this week (May 11-14) was supposed to be the Metaswitch Forum in Las Vegas, so I’m assuming that had COVID-19 not intervened, this announcement would have been made on stage at the event, which would have led to some fascinating discussions among the attendees.
As I said, we don’t know how long it will take for the deal to officially close, but the Affirmed deal was announced by Microsoft on March 26 and closed on April 23 – so it looks like this final phase of due diligence could take as little as a month (equally, it wouldn’t surprise me if it ended up being a few months).
What about UCaaS and the wireline business?
This is the big unanswered question. Metaswitch recently announced that Perimeta had been certified to interoperate with Microsoft Teams, so there are clearly some opportunities for Metaswitch’s UCaaS / Hosted PBX solution to integrate more closely with Teams – perhaps allowing Microsoft to offer a combined physical and software-based solution – but that’s pure speculation.
As for Metaswitch’s substantial business with wireline service providers, no concrete information is provided in the press release. I’ll leave you with a quote from Martin Lund, who writes…
We will continue to meet customers where they are, working together as communication service providers evolve their own operations. And we’ll be ideally placed to aid those operators keen to transition to cloud native deployments, to 5G networks and to the era of compelling applications that are served from the core and edge of new network architectures. I look forward to working with all our existing customers and new prospects alike, as we embark on the next leg of our mutual growth and evolution.
Martin Lund – CEO, Metaswitch Networks
