Ericsson buys Cisco rival Cradlepoint for $1.1 bn

Ericsson has agreed to acquire Cradlepoint, the US-based market leader in Wireless Edge WAN 4G and 5G Enterprise solutions, for $1.1 billion.
Ericsson CEO Borje Ekholm at MWC 2018
The investment is part of Ericsson’s strategy of capturing market share in the 5G Enterprise space. Cradlepoint complements Ericsson’s existing 5G Enterprise portfolio which includes Dedicated Networks and a global IoT platform.

# Ericsson’s largest deal in more than a decade
# Ericsson will boost presence in IoT
# Cradlepoint sells routers and a subscription-based wireless networking service
# Cradlepoint is a rival of Cisco
# Cradlepoint had sales of $137 million in 2019

“The acquisition is expensive, but the price tag is tolerable given high underlying growth rates and Ericsson’s potential for revenue expansion in the enterprise market,” said Societe Generale analyst Aleksander Peterc.

While Cradlepoint has mostly focused on the U.S. market, Ericsson aims to take the products outside North America and plans to keep it as a standalone business with its own sales team.

“Where we have struggled in the past is when we have started to integrate on the sales side. That’s when you lose track of all your go-to-market channels and customer interactions,” said Ericsson CEO Borje Ekholm.

Ericsson’s last big deal was in 2007, when it bought data network equipment vendor Redback Networks for $2.1 billion.

Cradlepoint will become a subsidiary of Ericsson while operating 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.

Cradlepoint has reported sales of SEK 1.2 billion or $137 million with a gross margin of 61 percent in 2019. Ericsson’s operating margins are expected to be negatively impacted by approximately 1 percent in 2021 and 202.

Cradlepoint is expected to contribute to operating cash-flow starting in 2022. Ericsson’s 2022 group financial targets remain unchanged.

Boise, Idaho, USA-headquartered Cradlepoint has 650 employees, providing wireless WAN solutions that deliver enterprise-grade connectivity. The company operates a research and development center in Silicon Valley, California, and new market offices in the United Kingdom and Australia.