Don't Count Out Ericsson

5:05 PM -- If Google (Nasdaq: GOOG) decides to unload Motorola Mobility LLC 's Home unit, which appears to be the prevailing thought now that the cable unit is under new leadership, one company to add to the list of possible suitors is Ericsson AB (Nasdaq: ERIC). (See Motorola's Home Unit Hires New Leader .)

Ericsson made our list when we conducted this exercise in March, but we left them off the refreshed group of candidates that we posted last week. Don't count Ericsson out of the mix now, multiple industry sources tell me. (See Who's Angling for Motorola's Cable Unit? )

Some of the reasons for keeping Ericsson in mind haven't changed all that much. Back then, we noted that such an acquisition would help Ericsson deepen its relationship with the North American cable industry, something it's been trying to do since its acquisitions of Tandberg Television in 2007, and, more recently, Bel Air Networks Inc., which puts Ericsson in a prime spot as cable operators expand their Wi-Fi footprints. (See Cable Goes Big With Wi-Fi Roaming .)

There isn't a lot of product overlap between Moto and Ericsson, as the Swedish giant doesn't make set-tops, cable modems or cable modem termination systems, and no longer seems to emphasize its edge QAM.

But Ericsson still has some Docsis history. It made a run at the cable modem market in the mid-to-late '90s, becoming the first vendor to sell Docsis devices for less than $100 per unit in a bid to buy market share. Ericsson ended up selling its cable modem assets to Canada's Aastra Technologies Ltd. in 2001, holding that it was no longer a vital business. Shrinking product margins didn't help, either.

What it lacks in these areas now could easily be bridged through the people and technologies it would obtain via an acquisition of Motorola Home. Ericsson's plenty big enough to pull off such a deal, and the cable guys could certainly do worse than seeing Moto's cable assets fall into Ericsson's hands.

There's another interesting reason to put Ericsson's name in the ring again. According to a two industry sources, Sarepta Advisors has done some consulting work with Ericsson in recent months on strategies to make it more competitive in North American cable. Marwan Fawaz, the new executive VP of Motorola Home, and Matt Bell, the unit's new senior VP of strategy and technology, were both part of Sarepta's founding team. (They're no longer involved in Sarepta's operations, a Motorola spokeswoman says.) (See Cable Vets Form Media Advisory Firm.)

So, I would not be surprised to learn that the idea of acquiring Motorola's cable business entered Ericsson's thinking once or twice since Google made its original $12.5 billion bid for Motorola Mobility.

If you still want to weigh in on who might land Motorola Home, be sure to cast your vote in our reader poll. At last check, 17 percent of voters believe an investment group led by former Motorola chief Ed Breen could take a stab at it, while 22 percent think Google will keep the unit. Thirteen percent believe a company not identified on that list (Ericsson?) could come away with it.

— Jeff Baumgartner, Site Editor, Light Reading Cable

Jeff Baumgartner 12/5/2012 | 5:28:41 PM
re: Don't Count Out Ericsson

Yes, we'll have to see if ERIC wants to dig a bit deeper and go after this. But if someone lands Home, they automatically become a primary supplier to the cable industry, something that just can't  be done (quickly) through organic growth. 

 There are lots of mid-sized and small vendors serving the cable guys, but very few opportunities to be right up there and be a check against Cisco.  The MSOs are notorious for squeezing vendors, so anyone trying to amplify their cable presence has to take that into consideration. But if you're serious about getting serious about domestic cable, this sort of opportunity may not come about for a looong time. If multiple parties go for it, I suppose everyone will have to be careful not to overpay for those assets. JB

craigleddy 12/5/2012 | 5:28:41 PM
re: Don't Count Out Ericsson

Another fine investigation, Detective Baumgartner. I've also heard Ericsson wants to increase its North American cable presence, though whether that translates into a multi-billion dollar acquisition remains to be seen.

I guess one of the questions facing all the potential suitors is: Where does the value of the Moto unit ultimately lie and what's the future of the business? Is the real value in hardware, software, intellectual property, its relationships with cable, all of the above, none of the above?

Would be good to get some inside dope on the future valuation of all those parts. Heck, we'll get this thing sold off right here through the LR website! Now who wants to bid? 


pogo 12/5/2012 | 5:28:39 PM
re: Don't Count Out Ericsson

It's interesting that Ericsson is reportedly trying to get into the cable access network, but they're exiting the telco access business.

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