Ericsson to Buy Entrisphere?

Ericsson AB (Nasdaq: ERIC) is set to acquire its GPON partner Entrisphere Inc. for about $290 million to further its chances of winning business at AT&T Inc. (NYSE: T), according to Swedish trade newspaper Ny Teknik.

The report suggests that a simple partnership is not a strong enough relationship for AT&T to award any GPON business to Ericsson and Entrisphere, where the duo are up against stiff competition from Alcatel (NYSE: ALA; Paris: CGEP:PA), Hitachi Telecom (USA) Inc. , Motorola Inc. (NYSE: MOT), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) to land purchase orders. (See RBOCs Aim for 10M GPON Subs.)

An Ericsson spokeswoman says the suggestion is "just rumor and we don't comment on such speculation," before adding: "We have a perfectly good partnership with Entrisphere. One example is the FTTH tender process at AT&T where we are in the process of bidding."

Entrisphere has yet to comment on the matter.

Prudential Equity Group LLC analyst Inder Singh believes such a move would give Ericsson a "significant boost in PON, building on the company's efforts to expand its broadband portfolio and market presence."

In a research note issued today, Singh said he expects Ericsson to do "bolt-on technology acquisitions to enhance its broadband portfolio, and we believe an Entrisphere acquisition would make strategic sense, though it may not give ERIC everything it needs."

What it would give the Swedish giant, though, is "a stronger position to compete for AT&T IPTV business," something that Ericsson stated was a strategic goal at its analyst conference in Tokyo recently, noted Singh.

Ericsson has been building up a more rounded IPTV story throughout 2006. (See Ericsson Brings the IPTV.)

The analyst also noted that such a move could be seen as "an incremental negative for Tellabs, as it would strengthen the competitive field in PON." Tellabs currently has a 65 percent PON market share in North America, notes the Prudential man.

Entrisphere announced its complete GPON access system in March this year. (See Entrisphere Goes GPON.)

Ericsson is being linked to a number of potential North American takeover targets as it looks to build on its Marconi acquisition. That acquisition strengthened its position in Europe and Asia/Pacific, and in optical and broadband access, but did little for Ericsson's U.S. presence and its RBOC contract chances in particular. (See Ericsson Buys Bulk of Marconi.)

In addition to the Entrisphere speculation, Ericsson has been linked to Tekelec 's switching business, and even as a possible suitor for Tellabs. (See Sources: Tekelec to Sell Switching Business and Who's Going to Buy Tellabs?)

Prudential's Singh notes that an "Ericsson/Entrisphere deal would likely curb speculation that Ericsson would buy Tellabs."

— Ray Le Maistre, International News Editor, Light Reading

flyingsausage 12/5/2012 | 3:16:36 PM
re: Ericsson to Buy Entrisphere? guess we should look outside of US,
today PON money is not in US but in Asia and Europe, with strong potential for emerging countries who are not owing any copper plant and will directly leapfrog to PON.

Ericsson is already having the entrisphere box at testing with couple of operators in Asia, and didn't had time yet to put an Ericsson logo on the box (only time enough to remove the entrisphere one) :)

Anyway, North America operators traditionally buy from north america vendors (TellLabs, Motorola, Alcatel/Lucent, ...), guess the chance for Ericsson of getting volume business there is rather low, maybe only some peanuts, or a low price third vendor position...
redface 12/5/2012 | 3:33:53 AM
re: Ericsson to Buy Entrisphere? If Ericsson is thinking about purchasing Entrisphere which is a GPON vendor, does it mean that there is significant GPON business at AT&T? Does this mean that AT&T is changing its strategy from fiber to the node (FTTN) to fiber to the home (FTTH)?
digits 12/5/2012 | 3:33:51 AM
re: Ericsson to Buy Entrisphere? AT&T has said it will use FTTH rollouts "where it makes sense" -- how much business that adds up to is anyone's guess at the moment.


Maybe there's more to the talk that AT&T will increasingly go down the FTTH route as time goes on.
But let's say for arument's sake that Ericsson made the acquisition and then landed some (any) fiber access business with AT&T, it would then have an RBOC GPON reference deployment it could leverage for other deals.

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