Ericsson AB has agreed to buy CradlePoint Inc, a US provider of wireless solutions that the Swedish technology giant says would help it expand its 5G footprint.
The deal gives CradlePoint an enterprise value of US$1.1 billion, which is to be paid in cash, Ericsson said in a statement yesterday.
“The investment is key to Ericsson’s ongoing strategy of capturing market share in the rapidly expanding 5G enterprise space. CradlePoint complements Ericsson’s existing 5G enterprise portfolio, which includes dedicated networks and a global IoT [Internet of Things] platform,” Ericsson said.
The deal “creates valuable new revenue streams for customers” and is expected to close in the fourth quarter, the Stockholm-based firm said.
Ericsson, Finland’s Nokia Oyj and China’s Huawei Technologies Co (華為) are locked in intense competition to supply 5G technology that has increasingly been caught up in a global political battle.
Ericsson CEO Borje Ekholm has repeatedly said that takeovers are “an integral part” of its 5G 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,” Ekholm said in yesterday’s statement.
Ericsson said that CradlePoint is “strongly positioned” in a market that has underlying growth of about 25 to 30 percent.
The US company was founded in 2006 and Ericsson said that its affiliation with it dates back to the launch of 4G in the US, more than a decade ago.
CradlePoint would continue to operate under its own brand, as a fully owned subsidiary of Ericsson.
Last year, the US company had sales of about US$135 million and a gross margin of 61 percent.
Ericsson said that its operating margins “are expected to be negatively impacted by approximately 1 percent in 2021 and 2022,” with half of the effect stemming from amortization costs of intangible assets related to the acquisition.
CradlePoint is expected to contribute to operating cash-flow starting in 2022, while Ericsson said that its 2022 group financial targets remain unchanged.
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