Ericsson Buys Entrisphere

Ericsson AB (Nasdaq: ERIC) acquired its U.S. GPON partner, Entrisphere Inc. , today for an undisclosed sum, to strengthen its position in the North American FTTH market. (See Ericsson Buys Entrisphere.)

The deal ends months of speculation and comes as no surprise given that Entrisphere was Ericsson's U.S. GPON partner. The Swedish giant has been talking about wanting a slice of the American FTTH market for some time. In February, Ericsson CEO Carl-Henric Svanberg said that he wanted a "fair share" of U.S. GPON business. (See Ericsson: Hungry for PON.)

Ericsson did not disclose how much it paid, but last November Light Reading pointed to a Swedish press report that said Entrisphere would fetch about $290 million. (See Ericsson to Buy Entrisphere?)

As partners, the two companies are competing for AT&T Inc. (NYSE: T)'s FTTH network business. The other contenders are Alcatel-Lucent (NYSE: ALU), Hitachi Telecom (USA) Inc. , Motorola Inc. (NYSE: MOT), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). With such formidable competition, Ericsson reportedly needed more than a partnership with Entrisphere for AT&T to take its GPON offering seriously.

Following the acquisitions of Marconi Corp. plc and Redback Networks Inc. , Entrisphere rounds out the Swedish vendor's broadband product portfolio. Entrisphere has 140 employees. In addition to bidding for AT&T's GPON business with Ericsson, Entrisphere won technical approval from Embarq Corp. (NYSE: EQ) in March to sell equipment for broadband digital carrier loop builds. (See Entrisphere Confirms Sprint Win .)

Ericsson has also been named as a possible buyer of Tellabs in the rumor mill. According to a Light Reading poll in January, Ericsson was believed most likely to purchase Tellabs. (See M&A Speculation.)

But the Entrisphere deal may end such speculation. Prudential Equity analyst Inder Singh says this acquisition reduces the chances of a Tellabs purchase. "Tellabs' main growth areas are edge routing and PON, which Ericsson acquired in Redback and Entrisphere," he says.

Ericsson's Svanberg says further acquisitions in IP infrastructure are "less likely." Instead, acquisitions will be in its new multimedia business. "Absolutely in multimedia," says Svanberg. "You can expect acquisitions there."

— Michelle Donegan, European Editor, Light Reading