Ericsson has agreed to acquire Cradlepoint, claimed to be the US-based market leader in wireless edge wide area network (WAN) 4G and 5G enterprise systems.
Founded in 2006, Cradlepoint has more than 650 staff, providing wireless WAN solutions that deliver enterprise-grade connectivity. In addition to its headquarters in Boise, Idaho, the company operates a research and development centre in Silicon Valley, California, and new market offices in the UK and Australia.
Its wireless WAN edge technology is designed to connect through 4G and 5G to deliver secure and flexible connectivity wherever and whenever it is needed for businesses, mobility and critical front-line emergency services. The company’s subscription model combines cloud-delivered software with hardware endpoints, support and training.
Ericsson sees Cradlepoint as strongly positioned in a market with underlying growth of 25-30%. It has a longstanding collaboration with Cradlepoint that dates back to the launch of 4G in the US market more than a decade ago.
When the deal completes, it will become a fully owned subsidiary of Ericsson’s Business Area Technologies and New Businesses division, while continuing to operate under its existing brand. Ericsson says that as a result of the deal, its combined offering will create valuable new revenue streams for customers by supporting full 5G-enabled services for enterprise, and boost returns on investments in the network.
Cradlepoint’s sales for 2019 were SEK1.2bn with a gross margin of 61% and the acquisition price amounts to an enterprise value of $1.1bn. The transaction is expected to close before the end of the fourth quarter 2020, subject to closing conditions. The purchase price, funded from Ericsson’s cash in hand, is paid in full on closing.
With the purchase, Ericsson’s operating margins are expected to be negatively impacted by about 1% in 2021 and 2022, half of which relates to amortisation of intangible assets that arise from the acquisition. Cradlepoint is expected to contribute to operating cashflow starting in 2022, for which year Ericsson’s group financial targets remain unchanged.
Ericsson president and CEO Börje Ekholm said portfolio-near acquisitions were an integral part of the company’s strategy and the Cradlepoint deal complements existing offerings and is key to the firm’s 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,” he said. “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.”
Cradlepoint CEO and chairman George Mulhern added: “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. 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.”