However, there can be problems finding a suitor. Competition in the video conferencing business is fierce, which means there are no obvious buyers. And analysts say that even after the stock’s big drop, Zoom is still pretty expensive.
The biggest obstacle to a deal might be Zoom’s price.
Zoom could become private
Argus’ Joseph Bonner noted that while Zoom stock is a long way from its pandemic highs, the company is still tough to swallow — even for a megacap tech with tons of cash.
“An acquisition of Zoom is unlikely due to a number of factors,” Bonner said in an email. “The thesis in favor of an acquisition would be to acquire the asset cheaply since it has lost so much value over the past year. With a market cap of $24 billion, it’s still not that cheap, and a takeover premium would push it to $30 billion or more.”
Bonner believes the price would likely deter any big tech buyers, as would the possibility of a potential deal coming under rigorous scrutiny from Washington regulators. However, Bonner said there was a chance Zoom would be bought by an investment firm so it would no longer be at the mercy of Wall Street’s quarterly earnings reports.
“Think of private equity. That could be an option,” said Bonner.
Others point out that Zoom is hardly the only tech/software company struggling with a post-Covid hangover. The Nasdaq also fell on concerns about rising interest rates and fears of a recession.
“I don’t think it’s fair to say that Zoom is having unique issues right now,” Morningstar analyst Dan Romanoff said in an email. “All software has been attacked in the last 10 months.”
Romanoff added that Zoom is “an innovative company with a great product.” The problem, he said, is that at the height of the pandemic, Zoom was “generating an unsustainable revenue trajectory” and the stock was “grossly overvalued.”
That means a deal would be possible. Romanoff noted that a Slack-Zoom combo might make sense.
“I thought a few years ago that Slack and Zoom should merge because there’s no need for standalone video, phone, and messaging products,” Romanoff said.
But he’s not sure Salesforce wants to buy Zoom, having already paid for Slack, noting that Salesforce “kept that [it is] no other major deals at this time.”
Another possible applicant
However, there is another possible wild card: Enterprise software company Oracle.
Zoom could also try to go back and strike a deal of its own if market conditions improve. That could help the company diversify.
“I believe Zoom is more of an acquirer than an acquirer at this point,” said James Fish, an analyst at Piper Sandler.