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Ericsson accelerates 5G for Enterprise with acquisition of Cradlepoint
September 18 2020 - 02:00AM
PR Newswire (US)
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- Ericsson acquires the market-leader for Wireless Edge WAN solutions for an enterprise value of USD 1.1 b.
- Acquisition complements Ericsson's enterprise offerings and creates valuable new revenue streams for customers
- Transaction expected to close during Q4 2020, subject to merger clearance and other closing conditions
STOCKHOLM, Sept. 18, 2020 /PRNewswire/ -- Ericsson (NASDAQ: ERIC) has agreed to acquire Cradlepoint, the US-based market leader in Wireless Edge WAN 4G and 5G Enterprise solutions. 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.
The combined offering will create valuable new revenue streams for customers by supporting full 5G-enabled services for enterprise, and boost returns on investments in the network.
Cradlepoint will become a fully owned subsidiary of Ericsson while continuing to operate under its existing brand. Cradlepoint employees will remain within the company, headquartered in Boise, Idaho. It will be part of Ericsson's Business Area Technologies & New Businesses.
The acquisition price amounts to an enterprise value of USD 1.1 b. with the transaction expected to close before the end of Q4 2020, subject to closing conditions. The purchase price, which is funded from Ericsson's cash-in-hand, is paid in full on closing. Cradlepoint's sales for 2019 were SEK 1.2 b. with a gross margin of 61%. Ericsson's operating margins are expected to be negatively impacted by approximately 1% in 2021 and 2022 - where half is related to amortization of intangible assets which arise from the acquisition. Cradlepoint is expected to contribute to operating cash-flow starting in 2022. Ericsson's 2022 group financial targets remain unchanged.
Wireless wide area network (wireless WAN) Edge solutions connect through 4G and 5G to deliver fast, secure, and flexible connectivity wherever and whenever it is needed for businesses, mobility and critical frontline emergency services. Cradlepoint is strongly positioned in a market with underlying growth of 25-30%.
Börje Ekholm, President and CEO Ericsson, says: "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 is uniquely positioned to build on Cradlepoint's leadership position in Wireless Edge and the wireless WAN market. Combining the scale of our market access and established relationships with the world's biggest mobile operators we are making a strong investment to support our customers to grow in this exciting market. I would like to extend a very warm welcome to all Cradlepoint employees."
George Mulhern, CEO and Chairman, Cradlepoint says: "We have led the way in bringing the power of cellular networks and technologies to enterprise and public sector customers - helping them connect beyond the limits of traditional wired WANs. Ericsson with its global 5G leadership is a great match for us and I am very excited to continue to scale and expand our business together."
Founded in 2006, Cradlepoint has more than 650 employees, providing wireless WAN solutions that deliver enterprise-grade connectivity. In addition to the company headquarters in Boise, Idaho, USA, the company operates a research and development center in Silicon Valley, California, and new market offices in the United Kingdom and Australia.
Cradlepoint's subscription model combines cloud-delivered software with hardware endpoints, support and training.
Ericsson's long-standing collaboration with Cradlepoint dates back to the launch of 4G in the U.S. market more than a decade ago.
INVITATION TO MEDIA AND ANALYST CALL
The company will hold a conference call for journalists, financial analysts and investors. Börje Ekholm, President and CEO, Carl Mellander, Chief Financial Officer, and Åsa Tamsons, Head of Business Area Technologies & New Businesses, will make brief comments and take questions.
The conference call will begin September 18, at 9:00 AM CEST (8:00 AM GMT in London and 3:00 AM EST in New York).
To join the conference call, please phone one of the following numbers:
Sweden: +46 (0)8 566 42651 (Toll-free Sweden: 0200 883 685)
International/UK: +44 (0)333 300 0804 (Toll-free International/UK: 0800 358 9473)
US: +1 631 913 1422 (Toll-free US: +1 855 857 0686)
PIN code: 38166079#
A live audio webcast of the conference call will be available at www.ericsson.com/investors and www.ericsson.com/newsroom
Replay:
A replay of the conference call will be available from about one hour after the conference call has ended until September 24, 2020.
Sweden replay number: +46 (0) 8 519 993 85
International/UK replay number: +44 (0) 333 300 0819
US replay number: +1 (866) 931 1566
PIN code replay: 301331532#
An on-demand webcast will be available at www.ericsson.com/investors and www.ericsson.com/newsroom approximately one hour after the webcast ended.
NOTES TO EDITORS:
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MORE INFORMATION AT:
Ericsson Newsroom
FOR FURTHER INFORMATION, PLEASE CONTACT
Contact person
Peter Nyquist, Head of Investor Relations
Phone: +46 705 75 29 06
E-mail: peter.nyquist@ericsson.com
Additional contact
Stella Medlicott, Senior Vice President, Marketing and Corporate Relations
Phone: +46 730 95 65 39
E-mail: media.relations@ericsson.com
Investors
Stefan Jelvin, Director, Investor Relations
Phone: +46 709 86 02 27
E-mail: stefan.jelvin@ericsson.com
Media
Peter Olofsson, Head of Corporate Communications
Phone: +46 702 67 34 45
E-mail: media.relations@ericsson.com
Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
About Ericsson
Ericsson enables communications service providers to capture the full value of connectivity. The company's portfolio spans Networks, Digital Services, Managed Services, and Emerging Business and is designed to help our customers go digital, increase efficiency and find new revenue streams. Ericsson's investments in innovation have delivered the benefits of telephony and mobile broadband to billions of people around the world. The Ericsson stock is listed on Nasdaq Stockholm and on Nasdaq New York. www.ericsson.com
Forward-looking statements
This release includes forward-looking statements, including statements reflecting management's current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, in particular the following:
- Our goals, strategies, planning assumptions and operational or financial performance expectations
- Industry trends, future characteristics and development of the markets in which we operate
- Our future liquidity, capital resources, capital expenditures, cost savings and profitability
- The expected demand for our existing and new products and services as well as plans to launch new products and services including research and development expenditures
- The ability to deliver on future plans and to realize potential for future growth
- The expected operational or financial performance of strategic cooperation activities and joint ventures
- The time until acquired entities and businesses will be integrated and accretive to income
- Technology and industry trends including the regulatory and standardization environment in which we operate, competition and our customer structure.
The words "believe," "expect," "foresee," "anticipate," "assume," "intend," "likely," "projects," "may," "could," "plan," "estimate," "forecast," "will," "should," "would," "predict," "aim," "ambition," "seek," "potential," "target," "might," "continue," or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section "Risk Factors" in the latest interim report, and in "Risk Factors" in the Annual Report 2019.
These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this release, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulations.
This information is information that Telefonaktiebolaget LM Ericsson is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above at 07:30 CEST on September 18, 2020.
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Ericsson accelerates 5G for Enterprise with acquisition of Cradlepoint
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@LaughinPaulRyan
4 años hace
Nokia and Ericsson have both resisted more drastic proposals, such as government mandates for completely open telecom standards, according to people familiar with the matter. The European companies are instead pressing U.S. officials to support their operations through government-backed groups like the Export-Import Bank and U.S. International Development Finance Corp., also known as DFC.
Congress created the DFC in 2018 by merging three existing development agencies as an American answer to China'sOne Belt, One Road initiative, which serves Beijing's interests through infrastructure investments around the world.
DFC chief Adam Boehler said the agency normally prefers to direct investment dollars to U.S. companies but has authority to support non-domestic manufacturers. "We're not out to play defense," he said. "We're out to play offense."
Even if wireless carriers have access to a more diverse group of vendors, it is unclear whether carriers will buy from new entrants. Some American technology has appeared in networks abroad, such as in Japan and India, but many of those deployments are only a few months old.
U.S. startups including Airspan Networks Inc., Altiostar Networks Inc., Blue Danube Systems, Mavenir Systems Inc. and Parallel Wireless Inc. have developed new technologies. Their executives say they have made some progress but are nowhere close to securing the billions of dollars of orders American cellphone carriers steer each year toward the established hardware companies.
Some U.S. companies see an opening in a recently passed law ordering American carriers to remove "untrusted" Huawei equipment, a technology swap that could generate more than $1 billion in potential sales. The measure still lacks funding.
Altiostar strategy chief Thierry Maupilé said government officials are more familiar than ever with the details of cellular technology but he would like to see more coordination. Mavenir Chief Executive Pardeep Kohli said Washington's focus on countering Huawei has helped raise the U.S. company's profile, especially in the past year, though that interest hasn't yet translated into many pro-domestic policies.
"There's a lot of talk, but nothing concrete," he said.
@LaughinPaulRyan
4 años hace
The ideas show how far the U.S. is willing to go in its fight with China over who will supply the world with advanced technologies.
The pandemic has complicated an already knotty planning process. The White House postponed a planned April 1 meeting on 5G technology with Mr. Trump and executives from U.S. wireless carriers, equipment makers and major tech companies including Dell Technologies Inc., Intel Corp., and Microsoft Corp. after the virus shut down most travel.
Administration officials have touted progress over the past year in spurring the rollout of faster 5G networks in the U.S., by speeding up auctions of airwave licenses and enacting regulatory changes to make it easier to install equipment.
"Our governmentwide project here in the Trump administration is very, very strong," National Economic Council Director Larry Kudlow said, adding that a spate of major 5G contracts awarded to European suppliers in recent weeks shows that the market tide is turning against China.
Huawei is the world's top seller of telecommunications gear, with equipment in cellphone networks from Asia to Germany. The Chinese company captured 28% of global spending on telecom equipment in the first quarter of this year, according to market researcher Dell'Oro Group. Huawei is able to offer its products at lower prices than rivals with support from the Chinese government, The Wall Street Journal has reported.
U.S. suppliers are still too small to compete with Huawei, which means large wireless carriers unwilling to buy Chinese equipment remain reliant on three international suppliers: Ericsson, Nokia and Samsung Electronics Co.
"For the first time in modern history, the United States has not been the leader in an emerging wave of critical technology," warns a paper that circulated in the White House, written late last year by telecom experts including former National Aeronautics and Space Administration boss Daniel Goldin and former Nokia technology executive Hossein Moiin.
The group aims to create a "US-flagged" supplier that could fill the gap left open by U.S. champions that years ago were acquired, like Lucent Technologies, or disappeared.
Earlier this year, a pro-buyout group pitched the idea of a government-supported consortium investing directly in Nokia or Ericsson to administration and congressional officials, according to people familiar with the matter. The proposal had support from a group of private-equity investors led by Cerberus Capital Management LP but stalled in recent weeks as the equipment makers' stock prices rose, the people said. A Cerberus spokesman didn't respond to requests for comment.
Attorney General William Barr endorsed the idea of American public or private-sector ownership of the European suppliers in a February speech, saying it would create "a more formidable competitor and eliminate concerns over its staying power."
The attorney general later promoted the idea of "integrated open networks," a concept that allows cellphone companies to mix and match network components from different companies. Today's carriers generally buy bundles of software and equipment from one supplier for specific cities, stunting competition.
A Justice Department spokeswoman declined to comment further.
Other companies have closed ranks behind the Open RAN Policy Coalition, a new group that advocates for competition in cell-tower equipment. The group, led by wireless carrier AT&T, includes several U.S. software companies seeking a foothold in wireless networks, as well as more established players, including Nokia.
"Some see this as an opportunity to facilitate the creation of an industrial base inside the United States," said Brian Hendricks, Nokia's(NOK) policy chief for the Americas. "The U.S. has been out of the game for a while."
Mr. Hendricks said the Finnish company's U.S. research and manufacturing assets will play a role in the future supply chain but acknowledged more competition is inevitable.
Ericsson executives have said they don't expect to join the policy coalition. The Swedish supplier's technology chief, Erik Ekudden, said governments shouldn't interfere with technical work that the private sector is well equipped to handle.
Samsung strategy executive Alok Shah said the South Korean technology giant already manufactures some 5G components in the U.S., including cellular base station chips made at an Austin, Texas, factory.
An AT&T spokeswoman said a more diverse and secure supply chain is a company priority.
Large U.S. wireless carriers have been dissuaded from buying Huawei equipment since a House committee in 2012 named the company a national-security threat. At the time, the panel said equipment from Huawei and Chinese rival ZTE Corp. could be used to spy or disrupt U.S. communications, allegations the companies deny.
That has channeled almost all U.S. wireless business to Nokia, Ericsson and Samsung. Still, many wireless executives are concerned about the long-term health of Nokia and Ericsson, which have spent years trying to restructure their operations. Nokia halted its dividend last year and in March said its CEO is stepping down. Ericsson has returned to profitability after years of restructuring.
Without adequate competition, some China hawks and U.S. telecom executives fear Huawei's reach within global telecom networks would become irreversible.
Huawei executive Vincent Pang said in a February interview that starting a new cellular-equipment maker from scratch is easier said than done. "In 5G, you don't just invest $6 billion and you're there," he said. "It would take years. So maybe the fastest way would be to buy from existing suppliers."
Cisco Chief Executive Chuck Robbins discussed a potential deal to buy all or part of a European equipment firm last year with Mr. Kudlow, the White House economic adviser, though the talks were "more patriotism-driven" than a reflection of Cisco's merger interest, a person familiar with the meeting said.
Mr. Robbins "didn't want the U.S. to fall behind," the person said, but the company, which makes computer networking gear, was unwilling to invest in a less profitable business like Nokia or Ericsson without some sort of financial incentives, the person added. A Cisco spokeswoman declined to comment.
Mr. Kudlow said that talk of a U.S. company buying overseas suppliers has since cooled. "Nokia, Samsung and Ericsson, they're still very much in the game and they're adding to their presence in the U.S." he said. "We want them to move here and we might help them out" through tax policy. "We might pay some moving expenses, but that's different than actual ownership," he said.
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