Swedish telecom giant Ericsson has agreed to buy Cradlepoint, a U.S. wireless networking company, for $1.1 billion.
Ericsson said the deal was part of its 5G expansion plans. Its combined offering would create new revenue streams and boost returns on investments in the network, it said.
“Portfolio-near acquisitions are an integral part of our earlier communicated strategy. The acquisition of Cradlepoint complements our existing offerings and is key to our strategy of helping customers grow the value of their 5G network investments,” Ericsson chief executive officer Börje Ekholm said.
Ericsson is funding the acquisition with cash on hand, paid in full on losing. The company said its group financial targets for 2022 remain unchanged.
“We think this will give our customers a chance to generate new income sources within the enterprise segment,” Ericsson chief financial officer Carl Mellander said in an interview.
Under the terms of the deal, Cradlepoint will become a subsidiary of Ericsson, in the Business Area Technologies & New Businesses group, while continuing to operate under its brand. Cradlepoint’s business is focused in the U.S., but Ericsson said it plans to market its products outside North America while keeping the company’s business with its own sales team.
“Where we have struggled in the past is when we have started to integrate on the sales side. That’s when you lose track of all your go-to-market channels and customer interactions,” Ekholm said.
The last major acquisition from Ericsson came in 2007, when it paid $2.1 billion to buy Redback Networks.
“The acquisition is expensive, but the price tag is tolerable given high underlying growth rates and Ericsson’s potential for revenue expansion in the enterprise market,” Societe Generale analyst Aleksander Peterc said.
The deal is expected to close before the end of the fourth quarter of 2020.
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