Ericsson to buy Cradlepoint for $1.1 billion cash

Ericsson today announced an agreement to pay $1.1 billion cash to acquire Cradlepoint—known in the U.S. public-safety market for providing broadband connectivity solutions in vehicles—in a deal that is expected to close by the end of the year.

Ericsson President and CEO Börje Ekholm described Cradlepoint as a leading provider of wireless-edge WAN enterprise solutions that leverage the 4G and 5G networks deployed by Ericsson’s primary customers—commercial cellular carriers. Cradlepoint can help carriers address a key financial pain point as they deploy expensive 5G systems.

“Many of our customers have been facing a tough and challenging situation—data growth in the networks is exponential, but service revenues are flat,” Ekholm said during conference call announcing the deal. “This investment is part of our strategy to build a strong enterprise offering and to address our customers’ situation by creating value, with new revenue streams for them.

“With Cradlepoint, we also get a beachhead in the enterprise market that we can build further upon. At the same time, we’re securing sustainable demand for our core business, as traffic in the network will increase with new use cases, as well as creating a strong foundation of long-term value with Ericsson.”

Ericsson believes Cradlepoint can help address connectivity needs in three key areas, Ekholm said. In addition to mobile solutions—such as those used in first-responder vehicles—wireless WAN offerings help meet the connectivity needs for enterprise branch offices and stationery units, such as vending machines or ATMs.

In all scenarios, Cradlepoint solutions can help enterprise customers leverage anticipated growth and developments in cloud-based solutions and Internet of Things (IoT) initiatives.

Cradlepoint historically has concentrated its sales within North America, as well as developing its presence in Australia and the United Kingdom. Ericsson officials repeatedly cited plans to expand Cradlepoint’s reach throughout the world.

“Basically, they [Cradlepoint sales representatives] are working with 10 service providers around the world, and we have a relationship with 400,” Asa Tamsons, Ericsson’s head of business-area technologies and new businesses, said during the conference call.

While Ericsson hopes to expand Cradlepoint’s market opportunities and enhance its research-and-development efforts, Ekholm emphasized that Cradlepoint will not be integrated fully into Ericsson’s operations. Because that strategy has proven problematic with past acquisitions, Ekholm said Cradlepoint will “integrate light” and continue its existing business, headquartered in Boise, Idaho.

“We want to work together with Cradlepoint,” Ekholm said. “We want to build on their success, their brand and business model. The company’s solutions will continue to be delivered as a subscription service through its growing list of partners, and we’re focused on keeping that momentum.

“Cradlepoint will operate as a standalone operation, fully owned by Ericsson within the business-area technologies and emerging business portfolio. This will minimize integration disturbance for Cradlepoint’s current employees, customers and partners.”

Cradlepoint CEO and Chairman George Mulhern expressed optimism about the potential benefits of being part of Ericsson, one of the largest telecommunications equipment vendors in the world.

“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,” Mulhern said in a prepared statement. “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.”

When asked whether Ericsson’s longstanding partnership with Motorola Solutions in the public-safety space would be harmed with the proposed acquisition of Cradlepoint, Tamsons said she does not believe it will be a problem, noting that Cradlepoint and Motorola Solutions provide different core offerings to first responders.

“Typically, when you go in and look at the devices that you have within an ambulance and other type of first-responder [vehicles], you have different devices that they need to aggregate to one system or one endpoint,” Tamsons said. “That endpoint is Cradlepoint.”

“Obviously, they can aggregate other types of devices into that. That’s one of the big values they bring. So, you will always have other providers with complementary solutions out there. Motorola is one of them and is partnering with both of us [Ericsson and Cradlepoint].”