Should Zoom Acquire Bandwidth Instead of Five9?

Zoom Video Communications (ZM -0.99%) and Five9 (FIVN -0.60%) recently called off their merger. But speculation has arisen that perhaps Zoom would be interested in acquiring Bandwidth (BAND -3.63%) instead. Fool.com contributors Jason Hall, Jon Quast, and Nicholas Rossolillo discuss whether that would make sense in this Motley Fool Live segment from "The Five" recorded on Oct. 1.

Jason Hall: Jon, what do you think here?

Jon Quast: Well, yeah, it's interesting and I don't disagree with Nick at all. I think that those are some really interesting companies he brings to the table. The counter perspective perhaps is that the CEO of Five9 and CEO of Zoom both come from Cisco (CSCO -0.52%) before. I think these are two guys, two peas in a pod, I think they really like each other. I think they are buddies. I don't know how much Zoom is going to want to go after Five9's market. I think that they really like Five9 compared to other companies. That's just a thought. Another thing that's emerging as a rumor on financial Twitter is that the company might want to go after Bandwidth. Nick, can you explain what Bandwidth is real fast because Jason and I can't do it as eloquent.

Hall: It's a foreign language. He's just going to be speaking English here, folks.

Nicholas Rossolillo: That's why I took my glasses off today. I knew you guys were going to ask me some nerdy questions today.

Hall: Love this. Nick, make us all look smarter.

Rossolillo: Rather than just talk about what it does maybe we just compare to another company that I think a lot of listeners are probably familiar with, Twilio (TWLO -1.59%). Twilio operates a library of services that the developer can integrate into an app, like a piece of software that embeds video feed into an app. You don't have to recreate all the code involved with making a video stream in your software, you can just like grab it from Twilio and integrate it into your app and then just pay Twilio for the use of that over time. Bandwidth does the same thing. Does that make sense?

Quast: Awesome. Yeah, appreciate that. The only thing that I would say with the rumor here on Bandwidth and why: I don't think Zoom wants to get into this market at all. It's because Zoom has gotten to where it is by partnering with companies in verticals that it doesn't want. By promoting this, hey, we're being very collaborative here. This is something that they put out. If you watch the Zoom presentation that we did on Tuesday -- Brian and Yasser and I, we talked about this and how they're partnering with companies. They are providing their customers with what they're calling a Cloud Peering Provider Exchange. Whoever Zoom's customer, they're saying, look, we don't care which of these companies you use, use any of them because we're partnering up with all of them. If they acquire Bandwidth, then they're saying we want this market and Tata Communications, Pure IP, Invite, we're coming after you now. We were your partners now we're your competitors. Just doesn't really feel like it's in the spirit of Zoom.

Hall: Yes, I think there's a lot of to agree with there Jon and Nick. I don't want to say I'm going to punt on this one but I want to speak more generally. What I really hope is that it hits on the two things that you talked about. Number one, you find a business that Zoom wants to go after as part of Zoom. It's not going to put them in some competitive disadvantage from companies that they count on as partners but that's also economically sound. Zoom is incredibly profitable. It's incredibly cash-flow positive. I think it puts a half a billion dollars in operating cash every quarter, it's just incredible. I want to see Eric Yuan continue to allocate that capital, and I think he will. I think he's going to remain disciplined because he built this business from the ground up because the folks at Cisco had no interest in doing what he wanted to do. I think he's got a chip on his shoulder there. As much he's like the most humble, kind guy, I really think he has a chip on his shoulder to build something incredible. As incredible as Zoom is, I think he wants to make it even incredibler, I just coined that term there. That's what I think guys.