September 18—Ericsson, a leading networking gear vendor, announced plans to acquire wireless technology CradlePoint, Inc. for $1.1 billion. In a press release, the purchaser said it would use its new subsidiary’s technology to expand its enterprise 5G offerings. The tie-up should be complete by Q4 2020, barring any regulatory problems.
Post-merger, CradlePoint will continue its operations as a wholly-owned subsidiary of its parent company.
Why Ericsson is Buying CradlePoint
According to research firm Dell’Oro Group, the global telecommunications industry spends around $35 billion a year on wireless base stations. While always an important part of the sector, the deployment of fifth-generation mobile data networks has prompted carriers worldwide to upgrade their equipment. Therefore, Ericsson is acquiring CradlePoint to take full advantage of the market opportunity presented by the 5G rollout.
The Swedish corporation’s $1.1 billion capital expenditure seems prudent for a few reasons.
CradlePoint, founded in 2006, made its name by helping businesses unlock the potential of LTE and 5G networking technology. The firm’s core product is a cloud-based subscription platform called NetCloud. The corporation utilizes wireless edge routers and robust software to establish a secure Internet of Things (IoT) system, online-enabled vehicles, and fixed and temporary points of connectivity.
For instance, CradlePoint provided SageGreenLife, a vertical garden company, with IoT tools to manage its installations. The firm also worked with Piada Italian Street Food to update its digital infrastructure to support patron-accessible Wi-Fi service, a point-of-sale (POS) network, and a connected security system.
The Boise, Idaho-based company’s ability to deliver innovative and practical solutions won it 20,000 clients across 50 countries.
Given its resources and range, Ericsson should make a lot of money deploying CradlePoint’s technology on a global scale.
The Value of Patience
While CradlePoint is a logical acquisition for Ericsson, the timing of the deal reflects the older firm’s shrewd business acumen.
The corporation explained its relationship with the younger company began over a decade ago. The two tech suppliers collaborated to introduce fourth-generation mobile networking technology to the U.S. market in the 2010s. That means Ericsson has known CradlePoint is a quality provider for a long time.
It also knew high-speed mobile data networks, IoT, and edge computing are technologies that did not reach maturity until recently.
Had Ericsson snapped up CradlePoint when it was a promising startup, it probably could have saved a lot of money. But ten years ago, the firm’s offerings would not have been worth as much because they had fewer applications. By taking the long view, the Swedish corporation let the American company evolved into a real player within its field.
As the world has begun to adjust to the post-coronavirus landscape, merger and acquisition activity has spiked in the U.S. Kualkin Ginsburg, a business advisory firm, recently noted moneyed corporations are looking to scoop up smaller businesses at a bargain due to widespread economic instability.
However, the circumstances surrounding Ericsson’s purchase of CradlePoint indicates there might be more value in being patient.