Ericsson untethers from IoT software with asset sale to Aeris

If it’s so good, and occupies such an important market, why are you selling it? It’s the obvious question whenever a company gushes about an asset it’s offloading, and it was no different with the sale of Ericsson’s IoT Accelerator and Connected Vehicle Cloud businesses to Aeris, announced in some detail this morning.

IoT Accelerator, boasted Ericsson in its statement, has 9,000 enterprise users, manages about 95 million connected devices worldwide and can tap into a “growing ecosystem” of more than 35 telcos that rely on Ericsson for “Internet of Things” connectivity. Connected Vehicle Cloud is the “most complete connected car platform on the market today,” said the Swedish vendor, disconnecting itself from the business.

Some explanation was later provided. “Despite significant investments to address the fragmentation of the IoT market, Ericsson has only tapped into a limited part of the value chain, limiting the returns of such investments,” said Åsa Tamsons, the head of Ericsson’s business area technologies and new businesses, in prepared remarks.

From the Swedish firm’s perspective, the divestment does not look unusual in a world where big companies are knuckling down on what they do best and offloading non-core assets. “Consolidation is still happening and at the same time Big Tech wants to focus on core capabilities and is retrenching somewhat and announcing layoffs,” said Andy Brown, the IoT practice lead at Omdia (a sister company to Light Reading). “IoT, while a core part of digital transformation, means plowing in a lot of resources.”

Financially, Ericsson had not been able to make its IoT platform business work, fingering it as the main culprit for the unprofitability of Tamsons’ unit. Selling it will reduce quarterly losses by 250 million Swedish kronor (US$24 million), although Ericsson will incur a one-time hit to earnings (before interest and tax) of SEK1.1 billion ($110 million) in the final quarter of this year. What remains of IoT – which, before the transaction, was expected to generate SEK800 million ($77 million) in sales this year – will be transferred to what Ericsson calls “segment other,” the Siberia of Ericsson’s business.

Within enterprise, the segment housing Tamsons’ unit, IoT Accelerator and Connected Vehicle Cloud were barely visible financially. Overall, that segment made about SEK5.2 billion ($500 million) in sales for the recent third quarter alone, racking up an operating loss of about SEK1.7 billion ($160 million).

Mouse versus elephant

For Aeris, however, this looks like one of those mouse-swallowing-an-elephant deals that could be either transformative or indigestible. Brown puts Ericsson’s IoT Accelerator third in rankings of IoT management platforms by connections, behind Cisco and Vodafone.

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