Ericsson to acquire Cradlepoint in $1.1b deal

Ericsson has agreed to buy US-based wireless networking company Cradlepoint in a $1.1 billion deal, the Swedish telecoms gear maker said on Friday, as part of plans to expand its 5G-related products for business customers.

The deal, Ericsson’s largest in more than a decade, would give it access to tools that can connect devices using the so-called Internet of Things over a 4G or a 5G network.

“We think this will give our customers a chance to generate new income sources within the enterprise segment,” Ericsson finance chief Carl Mellander told Reuters.

Ericsson plans to sell Cradlepoint products to its mobile operator customers, who can create new revenue streams by selling it to their business clients.

Cradlepoint, which will become a subsidiary of Ericsson, sells routers and a subscription-based wireless networking service.

A rival of Cisco, Cradlepoint had sales of 1.2 billion crowns ($137 million) in 2019, with a gross margin of 61%. Ericsson estimates that Cradlepoint’s revenue will be about 1.6 billion crowns this year.

“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,” said Societe Generale analyst Aleksander Peterc.

While Cradlepoint has mostly focused on the US market, Ericsson aims to take the products outside North America and plans to keep it as a standalone business with its own sales team.
Reuters