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Ericsson Sells PBX Business

Ray Le Maistre
2/18/2008

Ericsson AB (Nasdaq: ERIC) is selling its enterprise PBX business to Canadian firm Aastra Technologies Ltd. for 650 million Swedish Kroner ($103 million) as part of its efforts to focus exclusively on carrier customers. (See Ericsson Sells PBX Biz.)

"Ericsson has a strategic focus on telecommunication operators and service providers, hence considers its enterprise PBX solutions business to be outside its core focus," noted the Swedish giant in its official statement Monday morning.

An Ericsson spokeswoman said the PBX products and associated applications are all sold through partners, and that the Swedish giant is "getting out of the indirect channels business."

She added that the giant vendor does not have any other similar business units to divest.

Aastra generates the vast majority of its sales in Europe and has grown significantly in the region during the past few years following a number of acquisitions. It will take on about 630 staff, of which 360 are based in Sweden. (See Aastra Ups Its Euro Telephony Assault.)

Ericsson's enterprise PBX business, which includes products such as its MX-ONE range of IP PBXs and its SIP-based Enterprise Multimedia Server, generated SEK3 billion ($473 million) in revenues in 2007 from customers in Western and Eastern Europe, the Middle East, Africa, Asia/Pacific, and Latin America.

The sale will slice only about 1.6 percent off Ericsson's annual revenues. The company recently announced 2007 revenues of SEK187.8 billion ($29.6 billion). (See Ericsson Cuts Jobs as H2 Bites.)

The deal will make a significant impact on Aastra's business though, as the revenues from the Ericsson business will add about 75 percent to Aastra's top line.

Aastra, which competes with the likes of Alcatel-Lucent (NYSE: ALU), Avaya Inc. , Cisco Systems Inc. (Nasdaq: CSCO), Nortel Networks Ltd. , and Siemens AG (NYSE: SI; Frankfurt: SIE) in the IP PBX market, generates revenues of around $600 million a year. The Canadian firm is set to report its 2007 financial results on February 20.

The acquisition will give Aastra greater scale in a sector that's set to grow by more than 20 percent during the next three years, from less than $10 billion in 2007 to about $12 billion in 2010, according to Infonetics Research Inc. .

The move doesn't mean Ericsson is abandoning the enterprise space completely, though, as it is still pushing what it calls "enterprise applications" directly to operators. These applications include push email, which is hosted by the carrier but provides service for enterprise customers. Ericsson noted it will be retaining "strategic products from the acquisition of Netwise," a Swedish developer of IP applications acquired in 2006. (See Ericsson Launches Netwise Takeover.)

The sale is expected to close in April 2008, once the deal receives regulatory approval from various competition authorities.

Ericsson's share price is hardly unchanged Monday at SEK14.00 on the Stockholm exchange.

— Ray Le Maistre, International News Editor, Light Reading

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douaibei
douaibei
12/5/2012 | 3:47:36 PM
re: Ericsson Sells PBX Business
Ericsson is focused on the carrier market, but the PBX businss is too small compare to they core business; PBX market need more on the software support which ericsson do not have, so the best option is to spin off the business.

Astra will be ale to develop a competitive UC story in the market
digits
digits
12/5/2012 | 3:47:34 PM
re: Ericsson Sells PBX Business
Doesn't size come into this?
I don't know how big the Avaya biz was when it was spun out, but I bet it was WAY bigger than the minnow Ericsson is selling off.

I am sure Ericsson had to make the call between investing heavily to try to make a bigger impression in a market where Cisco, Avaya and Nortel and strong, or back off.

Ray
FbytF
FbytF
12/5/2012 | 3:47:34 PM
re: Ericsson Sells PBX Business
Remember Lucent abondoned the Enterprise PBX space by spinning off Avaya to focus on the Carrier space exclusively. A market with too many competitors and not enough customers. See how well it worked out for Lucent. Go Ericsson, you deserve it.
jasanz
jasanz
12/5/2012 | 3:47:29 PM
re: Ericsson Sells PBX Business
What about Alcatel-Lucent? Can the OmniPCX present battle to Cisco Unifed Communications Manager?
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