Swedish telecom equipment giant Ericsson is acquiring U.S.-based Cradlepoint for $1.1 billion, as it looks to expand its presence and accelerate 5G adoption in the enterprise market.
Headquartered in Boise, Idaho, Cradlepoint is one of the leaders in the cellular-based wireless wide area network (WAN) edge market and is poised to grow revenue by more than 30% this year, according to Ericsson. With around 675 employees, Cradlepoint will continue operating under its current brand as a fully owned subsidiary of Ericsson.
Cradlepoint primarily serves the U.S., providing 4G connectivity products including wireless routers to enterprises, small and medium businesses and public safety agencies. It helps connect things like branch offices, mobile workforces, ambulances, and IoT devices. Ericsson noted Cradlepoint has more than 1 million active subscriptions for its network cloud software as a service (SaaS) platform that offers zero-touch on-boarding.
While most deployments have been 4G, Cradlepoint has a full portfolio of 5G-ready products. Over the summer the company discussed the opportunity for private LTE for enterprises using Citizens Broadband Radio Service (CBRS) spectrum.
“Portfolio-near acquisitions are an integral part of our earlier communicated strategy. 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,” said Ericsson President and CEO Börje Ekholm in a statement. “Ericsson is uniquely positioned to build on Cradlepoint’s leadership position in Wireless Edge and the wireless WAN market.”
Analysts at Cowen view the deal as “a well-conceived acquisition – strong strategic fit and a reasonable purchase price.”
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It may also point to a more direct relationship with enterprises.
“Cradlepoint should help ERIC in the enterprise market, especially with respect to accelerating and expanding ERIC’s presence in addressing 5G enterprise market opportunities beyond ERIC’s traditional service provider market,” wrote Cowen analysts in a Friday note to investors.
In contrast to rival Nokia, Ericsson has largely stayed away from going after enterprises directly, instead going through core service provider customer channels. In the announcement and during a media briefing call Ericsson appeared to downplay that the acquisition may signal a shift in that strategy, calling it good news for operators.
“Many of our customers have been facing a touch and challenging situation,” said Ekholm. “Data growth in the network is exponential but service revenues are flat. This investment is part of our strategy to build a strong enterprise offering and address our customers’ situation” by creating value through new revenue streams for them.
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Cradlepoint has more than 20,000 customers and 1,500 channel partners. Ericsson noted that 10 service providers account for most of Cradlepoint’s revenues, which totaled $150 million in 2019 and are expected to grow to $200 million.
In May, the company expanded its relationship with AT&T, enabling public safety agencies to buy select Cradlepoint wireless edge solutions including wireless routers directly from AT&T.
“In CradlePoint, ERIC gains a focused private company that is the, or one of the, leader(s) in a young, fast growing, long-tailed market that should eventually inflect with the roll-out of 5G,” wrote Cowen analysts.
“We expect this enterprise opportunity to eventually inflect with adoption of industrial automation, IoT and other private enterprise 5G use cases following the roll-out of 5G networks,” the firm added.
Expanding internationally
Cradlepoint has a proven track record in the U.S., but Ekholm said they see significant potential to expand outside of North America. Executives called out opportunities from Ericsson’s large network of service provider relationships globally to accelerate Cradlepoint’s international reach as bringing major value to the deal.
During the briefing Åsa Tamsons, Ericsson’s head of Business Area Technologies & New Businesses, said the vendor will be very focused on working closely with mobile operators to bring Cradlepoint solutions “to them and through them.” She noted that operators will probably play an even more important role to open up and expand the wireless WAN edge market outside of the U.S., in regions where it’s just getting started.
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Ericsson views wireless WAN as a high-growing market, expected to grow to $4 billion by 2024 and says Cradlepoint has around 25% share.
Cowen analysts said there’s significant opportunity for Ericsson to grow Cradlepoint’s footprint and revenue.