Ericsson has announced it will acquire Cradlepoint. The 1.1 billion dollar deal reflects Ericsson’s commitment to capturing the 5G Enterprise space.

Swedish telecommunication giant Ericsson announced that it will buy US-based Cradlepoint in a $1.1 billion deal that’s expected to close in Q4 2020.

Ericsson provides large-scale hardware, software and managed services to telcos, carriers and ISPs. However the company has increasingly looked to expand its presence in Edge applications, such as providing connectivity to business, retail and other venues at the “edge” of the telecom network.

Cradlepoint specializes in Wireless Edge WAN hardware for enterprise and other applications. Wireless wide area network (wireless WAN) Edge solutions connect through 4G and 5G to deliver Internet and network connectivity. These solutions are used for businesses, mobility and critical frontline emergency services.

A match made in 5G heaven

Both companies are currently concentrated on 5G. Ericsson supplies carriers with technology for building 5G networks; Cradlepoint’s routers enable enterprises to connect their stores and other assets to those 5G carrier networks. Idaho-based Cradlepoint has about 20,000 customers worldwide that generated $140 million in sales last year, according to the acquisition announcement.

Cradlepoint’s main differentiator isn’t its router line but rather the cloud-based network management platform it sells alongside the devices. The platform allows companies to deliver 5G coverage in a wide range of environments. Cradlepoint routers provide high-speed 5G connections in many edge locations. Applications include stores and factories, inside delivery vehicles and for “internet of things” (IoT) hardware such as industrial sensors.

Börje Ekholm, President and CEO Ericsson, says: “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. Ericsson is uniquely positioned to build on Cradlepoint’s leadership position in Wireless Edge and the wireless WAN market.”

Expensive, but a good deal for Ericsson

The $1.1Bn price tag reflects the more than just the value of Cradlepoint’s position in the market. The firm not only closed 2019 with $140 million in revenues but also achieved a 61% gross margin. Additionally, Ericsson claims  that the market in which Cradlepoint competes is seeing “underlying growth” of 25% to 30%.

With the acquisition, Cradlepoint will become a fully-owned subsidiary while operating under its own brand. The company is expected to start contributing to Ericsson’s operating cash flow starting in 2022.