Ringcentral-Unrecognized hypergrowth gem.

Ringcentral was first brought to my attention by Dan Niles in his 2014 CNBC interview when he identified RNG as a disruptor. It has been a key driver of my compounding since.

RNG provides a cloud based virtual telephone service for professionals, the UCaaS leader in the Cloud. EGHT may be a semi serious competitor. Recently, RNG’s state of the art cloud communications system has obtained much of its 30% YoY growth and 76% GP by feeding at the trough of Avaya’s considerable global customer base, i.e stealing Avaya USA customers away, one at a time and just beginning to threaten them abroad.

But that effort, though successful, has been costly in sales and marketing. Avaya customers recognize the need to advance to the cloud but some have wished to remain faithful to the old Ma Bell great-grandchild and tend to buy into Avaya’s yet unfulfilled promises and plea for patience. It has been difficult to persuade some of the more reluctant Avaya customers to make the change.

Avaya has found a solution to its own advantage and to the great advantage of Ringcentral also that should immediately improve revenue prospects for both companies.

Avaya and RNG have entered into an exclusive deal. Avaya receives commissions from RNG for serving its customers up on a platter, maintains it current customer base, and has a complete cloud based service to offer new customer prospects in this partnership with RNG. RNG gains explosive growth and global expansion with reduced sales and marketing costs.

In a CC last night, RNG says the deal will be immediately accretive and that will endure over the longer run. My expectation is that RNG 30% growth rate will escalate substantially after some gear up period. RNG gives $500M cash to Avaya, $375M to be applied against future commissions, and $125M convertible preferred for a 6% Avaya stake.

There’s more you can apprehend off of last night separate CCs by both companies. e.g currently RNG service has only scratched the surface internationally. But majority of Avaya customers are outside the USA.

Sounds like a really profound game changer for both companies to me.


HI addedupon,

At first read, I was thinking wow… RNG can really accelerate…

Then I learn, future commission paid in advance? never ever heard of such a thing…

How desperate RNG has to be for such a deal…

May be I need to study it more to better understand…


Maybe. But i see it as the other way around.

You might listen to last night’s CCs for more insight, but Avaya has been losing customers to Ringcentral and this deal is a fix.

RNG would likely have continued on its 30%+ growth track without the deal, much of it at the expense of Avaya, which had to do something to stop the hemorrhaging. Avaya aside, RNG will continue to expand

Check out the different stock price trends and revenue growth rates, which might be telling the story.

Interestingly while RNG market cap dwarfs AVYA, revenue run rate of AVYA is twice that of RNG. Not for long given the AVYA current growth rate of zero.

Of course, it is well known that Avaya came out of bankruptcy two years ago. RNG is essentially ensuring AVYA survival, which now serves RNG interests.

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