The biggest piece of M&A in the Ekholm era is designed to bolster Ericsson’s direct-to-enterprise offering.
Ericsson describes Cradlepoint as the US-based market leader in Wireless Edge WAN 4G and 5G Enterprise solutions. It says it’s spending 1.1 billion bucks on it because it ‘complements Ericsson’s existing 5G enterprise portfolio which includes dedicated networks and a global IoT platform.’ So this is about providing enterprise with bespoke 5G connectivity solutions such as private networks.
Perhaps the most intriguing aspect of this deal, apart from it being the biggest acquisition yet under the leadership of CEO Börje Ekholm, is what this might mean for the telco channel at Ericsson. Cradlepoint seems to largely direct to enterprise, rather than via the telecoms channel, which is where Ericsson derives most of its business.
Many of the most promising commercial opportunities presented by 5G are B2B ones such as smart factories and industrial IoT. While operators are all trying to get a piece of that action, so are many other vendors and system integrators in a variety of sectors. Not every potential enterprise connectivity customer will want to go through an operator, so Ericsson needs to have a solution if they prefer to go direct.
“Portfolio-near acquisitions are an integral part of our earlier communicated strategy,” said Ekholm. “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.”
Ekholm seems to be trying really hard to downplay the direct-to-market aspect of this acquisition, but if one of the reasons for this acquisition is Cradlepoint’s customer base, as the quote also indicates, then a big part of it is surely direct business.
“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,” said George Mulhern, CEO of Cradlepoint. “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.”
Overall this seems like a solid, relatively low-risk acquisition for Ericsson. It offers a bit of diversification without looking like some of the more speculative punts of the Vestberg era. Ekholm will presumably be speaking to his US operator customer to reassure them he has no desire to pull the enterprise rug out from under them. So long as he’s convincing this looks like a positive move. Ericsson’s shares were up a couple of percent on the news at time of writing.