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Ericsson Eyes 5G Enterprise Market With Cradlepoint Buyout

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Ericsson (ERIC - Free Report) has completed the acquisition of Cradlepoint, the market leader in Wireless Edge WAN solutions. The investment will strengthen the Sweden-based telecom equipment provider’s ability to grow in the 5G enterprise market.

Boise, ID-based Cradlepoint will be part of Ericsson’s Business Area Technologies & New Businesses. It will operate as a standalone subsidiary within the company. On Sep 18, Ericsson announced its intent to acquire Cradlepoint for an enterprise value of $1.1 billion. At closing, a consideration of about $1 billion was paid using Ericsson’s cash in hand.

Ericsson’s operating margin is expected to be negatively impacted by almost 1% in 2021 and 2022. Cradlepoint is expected to contribute to operating cash flow beginning in 2022. With Cradlepoint’s solutions, enterprises can connect sites, vehicles, mobile workforces and IoT devices in a seamless way using cellular technology.

As a result, Ericsson will be able to create new revenue streams for its customers by supporting 5G-enabled services. Its global presence and long standing associations with leading communications service providers will help accelerate Cradlepoint’s expansion. Cradlepoint operates an R&D center in Silicon Valley, CA. It also has international offices in the United Kingdom and Australia.

Meanwhile, Ericsson is confident in delivering on the 2020 Group target. The company currently has 65 live 5G networks and 113 commercial 5G agreements with operators. R&D investments have established Ericsson as a leader in 5G. Its portfolio spans Networks, Digital Services, Managed Services and Emerging Business.

Ericsson is witnessing healthy momentum in its business, based on the strategy to increase investments for technology leadership, including 5G. In Networks, the company’s ongoing activities are to invest in R&D to safeguard a leading product portfolio and cost leadership; increase investments in automation and serviceability to drive down costs, and selectively gain market share based on technology and cost competitiveness.

Ericsson has a long-term (three to five years) earnings growth expectation of 28.9% compared with 13.7% of the industry. The stock has returned 36.1% compared with the industry’s growth of 37.1% in the past six months.

Ericsson carries a Zacks Rank #3 (Hold), at present.

Some better-ranked stocks in the broader industry are Turtle Beach Corporation (HEAR - Free Report) , Corning Incorporated (GLW - Free Report) and Viavi Solutions Inc. (VIAV - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Turtle Beach delivered a trailing four-quarter positive earnings surprise of 41%, on average.

Corning delivered a trailing four-quarter positive earnings surprise of 40.7%, on average.

Viavi delivered a trailing four-quarter positive earnings surprise of 17.5%, on average.

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