Ericsson completes acquisition of Cradlepoint

Rhea-AI Summary

On November 2, 2020, Ericsson (NASDAQ: ERIC) completed its acquisition of Cradlepoint, a leader in Wireless WAN Edge solutions, for approximately USD 1 billion. This acquisition aims to enhance Ericsson's footprint in the growing 5G enterprise market. In 2019, Cradlepoint reported SEK 1.2 billion in sales with a 61% gross margin. However, Ericsson anticipates an operating margin decline of about 1% in 2021 and 2022, largely due to amortization costs. Cradlepoint will function as a standalone subsidiary, focusing on driving 5G services in enterprise connectivity.

Positive

• Acquisition expected to capture significant market share in 5G enterprise sector.
• Cradlepoint's strong sales performance (SEK 1.2 billion) with a gross margin of 61%.
• Potential for new revenue streams from combined offerings in 5G-enabled services.
• Strengthening of Ericsson's enterprise solutions enhances competitive positioning.

Negative

• Operating margins projected to decline by approximately 1% in 2021 and 2022 due to amortization costs.

STOCKHOLM, Nov. 2, 2020 /PRNewswire/ -- Ericsson (NASDAQ: ERIC) has completed its acquisition of Cradlepoint, the US-based market leader in Wireless WAN Edge 4G and 5G solutions for the enterprise market. The investment is key to Ericsson's ongoing strategy of capturing market share in the rapidly expanding 5G enterprise space.

Closing of the acquisition follows the announcement on September 18, 2020 of Ericsson's intention to acquire Cradlepoint. At closing, a consideration of around USD 1 b. was paid using Ericsson's cash-in-hand. 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 arising from the acquisition. Cradlepoint is expected to contribute to operating cash-flow starting in 2022.

Through Cradlepoint's solutions, companies can connect sites, vehicles, mobile workforces, and IoT devices in a simple and secure way using cellular technology. By leveraging the combined offering, Ericsson will be able to create valuable new revenue streams for its customers by supporting 5G-enabled services for enterprise, and boost returns on investments in the network. Ericsson's global presence and long-standing relationships with the world's leading service providers will also help accelerate Cradlepoint's international expansion.

Cradlepoint will operate as a stand-alone subsidiary within Ericsson and continue to build on the current market momentum as 5G is speeding up digital transformation and increasing the need for advanced connectivity services for enterprises. Cradlepoint will be part of Ericsson's Business Area Technologies & New Businesses.

Åsa Tamsons, Senior Vice President and Head of Business Area Technologies & New Businesses, says: "I am very excited to welcome Cradlepoint to the Ericsson family. With Cradlepoint's market leading solutions, we are strengthening our enterprise offering and taking an important step to lead the next wave of enterprise network transformation. Together, we will power solutions to the customer edge that help improve productivity and deliver real-time services, enabling us to drive faster adoption of 5G in enterprise segments. This is good news for our customers as it helps them to accelerate their returns on 5G investments."

Cradlepoint will continue to be headquartered in Boise, Idaho, USA. In addition to the company headquarters, Cradlepoint operates a research and development center in Silicon Valley, California, and international offices in the United Kingdom and Australia.

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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

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Ericsson completes acquisition of Cradlepoint

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SOURCE Ericsson

FAQ

What is the significance of Ericsson's acquisition of Cradlepoint?

The acquisition strengthens Ericsson's position in the rapidly growing 5G enterprise market.

How much did Ericsson pay for Cradlepoint?

Ericsson acquired Cradlepoint for approximately USD 1 billion.

When was the acquisition of Cradlepoint completed?

The acquisition was completed on November 2, 2020.

What impact will Cradlepoint have on Ericsson's financials?

Cradlepoint is expected to negatively impact Ericsson's operating margins by about 1% in 2021 and 2022.

What are the expected benefits of the acquisition for Ericsson?

The acquisition is anticipated to create new revenue streams and enhance Ericsson's offerings in 5G connectivity.