Ericsson Buys CradlePoint in $1.1 Billion Deal to Build 5G
Ericsson will buy CradlePoint Inc., a U.S. provider of wireless solutions that will help it expand its 5G footprint.
(Bloomberg) -- Ericsson AB has agreed to buy CradlePoint Inc., a U.S. provider of wireless solutions that the Swedish technology giant says will help it expand its 5G footprint.
Ericsson said the deal gives CradlePoint an enterprise value of $1.1 billion, which will be paid in cash, according to a statement on Friday.
“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 platform,” Ericsson said.
The deal “creates valuable new revenue streams for customers,” and is expected to close in the fourth quarter, subject to merger clearance, the Stockholm-based company said.
Ericsson, Nokia Oyj of Finland and China’s Huawei Technologies Co. are locked in intense competition to supply 5G technology that’s increasingly been caught up in a global political battle. Borje Ekholm, the chief executive of Ericsson, 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 Friday’s statement.
Ericsson said that CradlePoint is “strongly positioned” in a market that has underlying growth of about 25-30%. The U.S. company was founded in 2006, and Ericsson said its affiliation with it dates back to the launch of 4G in the U.S. more than a decade ago.
CradlePoint will continue to operate under its own brand, as a fully owned subsidiary of Ericsson. Its 650 staff “will remain within the company,” which will become part of Ericsson’s Business Area Technologies & New Businesses.
The U.S. company had 2019 sales of about $135 million, and a gross margin of 61%.
Ericsson said its operating margins “are expected to be negatively impacted by approximately 1% 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. Ericsson’s 2022 group financial targets remain unchanged, it said.
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