Ericsson Buys Cradlepoint in $1.1 Billion Deal to Boost 5G Offer -- Update
18 September 2020 - 8:09PM
Dow Jones News
By Dominic Chopping
STOCKHOLM--Ericsson AB on Friday announced the acquisition of
Cradlepoint, a U.S.-based wireless networking company, in a $1.1
billion deal.
The acquisition will see Ericsson boost its offering of products
that allow companies and public sector services connect to the
so-called Internet of Things over fourth- and fifth-generation
communication networks.
Although many next-generation 5G technologies are still in
development, several countries around the world last year began
building networks. However, a report on Friday from the European
Round Table for Industry warned that Europe's deployment of 5G
networks is "alarmingly slow" compared with the U.S., South Korea
and China. The group found that more than half of the European
Union's 27 member countries have not yet launched 5G commercial
services, while in South Korea and the U.S. initial services were
available last year.
Ericsson belongs to the ERT, along with many of Europe's major
industrial companies.
The purchase price for Cradlepoint, funded from Ericsson's
cash-in-hand, will be paid in full on closing, which is expected
before the end of the fourth quarter 2020.
Founded in 2006, Cradlepoint has over 650 employees between its
headquarters in Boise, Idaho, a research and development center in
Silicon Valley, California, and market offices in the U.K. and
Australia.
"With 5G seen as taking cellular networks deeper into enterprise
and industrial markets the deal makes sense for Ericsson in our
view. It allows them to expand into a fast growing adjacent market
which Ericsson believes will be [around] $4bn by 2024," said
analysts at Citi.
Cradlepoint's sales for 2019 were 1.2 billion Swedish kronor
($136.1 million) and it had a gross margin of 61%. Ericsson's
operating margins are expected to be negatively impacted by
approximately 1% in 2021 and 2022, but Cradlepoint is expected to
contribute to operating cash-flow starting in 2022.
Ericsson's 2022 group financial targets remain unchanged.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
September 18, 2020 05:54 ET (09:54 GMT)
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