The intervention of the US Department of Justice prevents Zoom from acquiring the cloud provider Five9 for $ 14.7 billion.
Five9 has terminated the contract for the acquisition by Zoom Video Communications. Five9 stated that the deal had not received enough votes from shareholders and that the merger plan would be “terminated by mutual agreement” . Zoom wanted to acquire Five9, which offers cloud-based contact center platforms for customer care, for $ 14.7 billion in shares.
The reason for the termination of the takeover is the review by Team Telecom, led by the US Department of Justice because the purchase of Five9 by Zoom could “pose a risk to national security or law enforcement interests”.
From WebEx to Cisco to Zoom
According to information from the Wall Street Journal, the investigation is aimed at alleged links between the company of the former Cisco developer, CEO, and founder of Zoom, Eric Yuan, to China. Yuan grew up in China, moved to Silicon Valley in 1997, and worked for web conferencing startup WebEx. After Cisco acquired WebEx, Yuan became Vice President of Engineering. In 2007, the yuan was naturalized in the United States. Yuan later left Cisco to start his own company, Zoom Video Communications and became a billionaire through Zoom’s IPO in 2019.
Many of Zoom’s developers are traditionally based in China, according to a report in the Wall Street Journal.At least since 2016, Zoom had advertised end-to-end encryption, which however did not exist. In addition, the US trade regulator FTC (Federal Trade Commission) accused Zoom of the fact that recorded meetings were not stored on an encrypted cloud storage as claimed, but were sometimes stored unencrypted on the Zoom servers for up to 60 days.