Cradlepoint buy nets Ericsson 5G infrastructure for carriers, enterprises

Ericsson’s purchase of wireless WAN vendor Cradlepoint means that the Sweden-based networking powerhouse is targeting growth in the 5G and edge markets, according to experts.

The deal, valued at $1.1 billion, will see Cradlepoint become a fully owned subsidiary of Ericsson, part of the larger company’s Business Area Technologies and New Business division

Cradlepoint was founded in 2006 in Boise, Idaho, and has roughly 700 employees and more than 20,000 customers, according to a deal report from 451 Research. The company’s main line of business is selling 3G/4G/LTE routers and modems to service providers and directly to enterprises that want to use that type of connectivity in private networks.

Cradlepoint has a large and varied enterprise-customer base ranging from law enforcement to smart cities to transportation, and has close relationships with carrier equipment manufacturers like Ericsson, whose business has also included wireless gear, but hasn’t overlapped with Cradlepoint’s. Ericsson’s main business is selling equipment to carriers, not enterprises.

While Ericsson trumpeted its intent to play a major role in the deployment of 5G in its announcement –Cradlepoint is expected to play a large role in private 5G networks in the U.S. – specific technologies are likely side issues next to the broader notion of expanding the company’s market share, according to Farpoint Group principal Craig Mathias.

“5G will clearly play a role, but I believe the motivator is to broaden Ericsson’s base, expanding into the enterprise along with the opportunity for both an immediate return as well as an evolutionary path to 5G,” he said. “But at present, the former is more important than the latter.”

It’s possible to characterize the Cradlepoint acquisition as another attempt to make headway in the enterprise private networking market, according to the 451 report on the deal–but that isn’t quite what’s going on here. Ericsson has made attempts to do that in the past, which were met with disfavor among the company’s telecom customers. Per 451, Ericsson has downplayed that aspect of the deal, but it could still strengthen the company’s hand if it ultimately decides that a renewed push on direct-to-enterprise sales is warranted.

Cradlepoint doesn’t generate positive operating income yet, but the impact of the company on new parent Ericsson’s own books is expected to be minimal – around a 1% hit to operating margin for the next two fiscal years.