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MarketScreener Homepage  >  Equities  >  NASDAQ OMX STOCKHOLM  >  Ericsson AB    ERIC B   SE0000108656

ERICSSON AB

(ERIC B)
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Ericsson : to buy networking specialist Cradlepoint in $1.1 bln 5G deal

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09/18/2020 | 03:24am EDT

(Adds detail, CEO and analyst comment)

STOCKHOLM, Sept 18 (Reuters) - Ericsson has agreed to buy U.S.-based wireless networking company Cradlepoint in a $1.1 billion deal, the Swedish telecoms gear maker said on Friday, as part of plans to expand its 5G-related products for business customers.

The deal, Ericsson's largest in more than a decade, would give it access to tools that can connect devices using the so-called Internet of Things over a 4G or a 5G network.

"We think this will give our customers a chance to generate new income sources within the enterprise segment," Ericsson finance chief Carl Mellander told Reuters.

Ericsson plans to sell Cradlepoint products to its mobile operator customers, who can create new revenue streams by selling it to their business clients.

Cradlepoint, which will become a subsidiary of Ericsson, sells routers and a subscription-based wireless networking service.

A rival of Cisco, Cradlepoint had sales of 1.2 billion crowns ($137 million) in 2019, with a gross margin of 61%. Ericsson estimates that Cradlepoint's revenue will be about 1.6 billion crowns this year.

"The acquisition is expensive, but the price tag is tolerable given high underlying growth rates and Ericsson's potential for revenue expansion in the enterprise market," said Societe Generale analyst Aleksander Peterc.

While Cradlepoint has mostly focused on the U.S. market, Ericsson aims to take the products outside North America and plans to keep it as a standalone business with its own sales team.

"Where we have struggled in the past is when we have started to integrate on the sales side. That's when you lose track of all your go-to-market channels and customer interactions," said Ericsson CEO Borje Ekholm.

Ericsson's last big deal was in 2007, when it bought data network equipment vendor Redback Networks for $2.1 billion.

The transaction, which is expected to close before the end of this year, will dent Ericsson's operating margins by about 1% in 2021 and 2022. The company expects the takeover to start contributing to operating cash flow from 2022.

Ericsson said its 2022 group financial targets remain unchanged. (Reporting by Helena Soderpalm and Supantha Mukherjee Editing by Tomasz Janowski and David Goodman)


Stocks mentioned in the article
ChangeLast1st jan.
CISCO SYSTEMS, INC. -0.06% 35.69 Delayed Quote.-25.58%
ERICSSON AB 0.05% 100.7 Delayed Quote.23.41%
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Financials
Sales 2020 232 B 25 978 M 25 978 M
Net income 2020 15 342 M 1 720 M 1 720 M
Net cash 2020 19 662 M 2 204 M 2 204 M
P/E ratio 2020 21,9x
Yield 2020 1,55%
Capitalization 337 B 37 772 M 37 812 M
EV / Sales 2020 1,37x
EV / Sales 2021 1,27x
Nbr of Employees 99 826
Free-Float 89,0%
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Technical analysis trends ERICSSON AB
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Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 116,34 SEK
Last Close Price 100,70 SEK
Spread / Highest target 39,4%
Spread / Average Target 15,5%
Spread / Lowest Target -14,6%
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Managers
NameTitle
Erik Börje Ekholm President, Chief Executive Officer & Director
Ronnie Leten Chairman
Carl Mellander CFO, Senior VP & Head-Group Function Finance
Erik Ekudden Chief Technology Officer & Senior Vice President
Torbjörn Nyman Director
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