Why Ericsson Is Buying Cradlepoint For $1.1 Billion

By Annie Baker ● September 22, 2020
  • Ericsson (NASDAQ: ERIC) recently announced it agreed to buy Cradlepoint, which is the US-based market leader in Wireless Edge WAN 4G and 5G Enterprise solutions. These are the details.

Ericsson (NASDAQ: ERIC) recently announced it agreed to buy Cradlepoint, which is the US-based market leader in Wireless Edge WAN 4G and 5G Enterprise solutions. This investment is key to Ericsson’s strategy of capturing market share in the rapidly expanding 5G Enterprise space. And Cradlepoint complements Ericsson’s existing 5G Enterprise portfolio which includes Dedicated Networks and a global IoT platform.

The combined offerings are going to create valuable new revenue streams for customers by supporting full 5G-enabled services for enterprise and boost returns on investments in the network.

Cradlepoint is going to 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. And it will be part of Ericsson’s Business Area Technologies & New Businesses.

The acquisition price amounts to an enterprise value of $1.1 billion 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 billion 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 the amortization of intangible assets that arise from the acquisition. And Cradlepoint is expected to contribute to operating cash-flow starting in 2022. Ericsson’s 2022 group financial targets are remaining unchanged. 

Wireless wide area network (wireless WAN) Edge solutions connect through 4G and 5G for delivering fast, secure, and flexible connectivity wherever and whenever it is needed for businesses, mobility, and critical frontline emergency services. And Cradlepoint is strongly positioned in a market with underlying growth of 25-30%.

Launched in 2006, Cradlepoint has over 650 employees, providing wireless WAN solutions that deliver enterprise-grade connectivity. And 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. And Ericsson’s long-standing collaboration with Cradlepoint dates back to the launch of 4G in the U.S. market over a decade ago.

KEY QUOTES:

“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.”

— Börje Ekholm, President and CEO Ericsson

“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.”

— George Mulhern, CEO and Chairman, Cradlepoint