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RingCentral (RNG) Acquires Kindite's Tech, Engineering Arm

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Zacks Equity Research
·4 min read
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RingCentral RNG recently announced the acquisition of the technology and engineering arm at Kindite, a developer of leading cryptographic technologies that minimize and mitigate security and privacy risks to information and applications in the cloud. The acquisition was completed in the first quarter of 2021.

The integration enables RingCentral to use Kindite as a cornerstone for building its world-class security capability.

Kindite’s data-protection platform incorporates a unique set of cryptographic key orchestration technologies, which deliver enhanced security, privacy and compliance and allow cloud applications to process encrypted data without decryption.

Ringcentral, Inc. Price and Consensus

Ringcentral, Inc. Price and Consensus
Ringcentral, Inc. Price and Consensus

Ringcentral, Inc. price-consensus-chart | Ringcentral, Inc. Quote

Strategic Investments & Partnerships: Key Catalysts

RingCentral is benefiting from various strategic investments and partnerships across complementary services, technologies and businesses such as the acquisitions of DeepAffects and Connect First.

The acquisition of DeepAffects in fourth-quarter 2020 has enabled RingCentral to deliver a smarter video meeting experience and real-time closed captioning with the help of DeepAffects’ conversational intelligence.

Moreover, Connect First’s cloud-based outbound/blended customer engagement platform for midsize and enterprise companies complements RingCentral’s current customer engagement portfolio and enables it to provide differentiated customer experiences.

Markedly, RingCentral spent $26 million in 2020 for acquisition of IP to complement and support its product development and enhancement initiatives.

Moreover, RingCentral largely benefits from significant contributions from its strong partnerships with global telecommunications companies like AT&T T, BT Group, TELUS Communications and Avaya.

In November 2020, the company entered into a strategic partnership with Vodafone VOD to deliver its Contact Center as a Service (CCaaS) and UCaaS services to the latter’s installed base of 30 million customers.

On Jan 21, 2021, RingCentral announced an expansion of its partnership with TELUS to enable Canada-based small businesses to easily transition their legacy phone systems to the cloud via TELUS Business Connect, an all-in-one communications solution for message, video, and phone.

Meanwhile, RingCentral partnered with Alcatel-Lucent to launch a new Rainbow Office solution, built on RingCentral Office. This partnership gives RingCentral exclusive access to Alcatel's 40 million on-premise customer base and helps accelerate RingCentral's international expansion given that Alcatel’s base is mainly in France and Indonesia.

Rainbow Office will be available in early 2021 as other partnerships with Atos and Avaya ramp to more material tailwinds. Meanwhile, Avaya Cloud Office is already in the market, and will more materially contribute to RingCentral’s revenues in 2021.

The company also expanded its strategic partnership with Atos SE with new Unify Office as the exclusive UCaaS solution for 40 million users of the Atos Unify family of products. Between Avaya, Atos SE and Alcatel, over 180 million endpoints are being pushed toward RingCentral, which creates a massive opportunity compared to the current 2.5 million endpoints.

However, the company is suffering from cost escalations and has expended significant resources upfront to market, promote and sell solutions, a trend that will likely continue in 2021 as the company is expanding in international markets. This is expected to hurt the company’s bottom line at least in the near term.

Zacks Rank & A Stock to Consider

RingCentral currently carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the broader technology sector is Arrow Electronics ARW, which has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Arrow Electronics is currently pegged at 15.2%.

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