Ericsson Spends $1.15 Billion in Cash to Acquire Telcordia

Beijing time on June 15 news, according to foreign media reports, mobile network equipment maker Ericsson will spend 1.15 billion US dollars in cash, the acquisition of the United States Telcordia Group, in order to deal with the explosive growth of data and services and withstand fierce competition.

Ericsson said in a statement on Tuesday that it has agreed to acquire Telcordia Group of Piscataway, NJ, with its investors Providence Equity Partners and Warburg Pincus. Telcordia's 2,600 employees will be transferred to Ericsson. Telcordia is a leading provider of fixed-line, mobile, and broadband communications software and services.

Hans Vestberg, Ericsson’s CEO, once predicted that 50 billion devices will be connected to the Internet worldwide by 2020, which poses enormous challenges for operators and system suppliers. Wei Hanshen told Reuters: “We will definitely become the leader in many different fields” and said Telcordia’s market is very fragmented.

Affected by this news, Ericsson's stock price rose 1.7% to 88.70 SEK/share.

The Swedish company stated that the global software and systems integration market is approximately 35 billion U.S. dollars, and the compound annual growth rate from 2010 to 2013 is expected to be 6-8%. Wei Hansi said: "With more and more devices connected to the network, service mobilization and the introduction of new mobile broadband business models, the importance of operations and business support systems will continue to grow."

He said: "In this regard, Telcordia has high-skilled personnel and knowledge, in North America and other markets with huge business and a good multi-vendor product portfolio." Ericsson expects the transaction to be completed in the fourth quarter of this year, starting to play its full role from the first quarter of next year, and will increase Ericsson's earnings per share within 12 months.

Richard Windsor, a global technology expert at Nomura Securities, an investment bank, believes that “transactions will help increase the attractiveness of Ericsson’s services and make it difficult for Huawei or ZTE to compete. Ericsson seems increasingly powerful in this regard.”

But he said: "The biggest question is whether Ericsson is over-bidding. They have had such precedents, for example, in the acquisition of Marconi and Redback."

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