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Ericsson CEO targets smaller acquisitions, talks up enterprise offering

© Reuters. FILE PHOTO: An Ericsson logo is pictured at the Mobile World Congress (MWC) in Shanghai, China, June 28, 2019. REUTERS/Aly Song

By Supantha Mukherjee and Martin Coulter

BARCELONA (Reuters) – Ericsson (BS:)’s CEO says the company is still in the market for more acquisitions, albeit smaller ones, after splurging over $7 billion to buy networking company Cradlepoint and communication platform Vonage. 

In contrast with Nokia (HE:), which announced a new strategy focused on enterprise, Ericsson expects to continue to focus on its business of selling to communications service providers (CSPs) or telecom operators along with adding to its enterprise offerings. 

While the global enterprise business, which revolves around private 5G and automating factories, has yet to grow significantly, it has been a melting pot of partnerships between equipment makers, mobile operators and big technology companies. 

“We will need to add to our enterprise offerings, so you will see smaller acquisitions,” CEO Borje Ekholm told Reuters on the sidelines of the Mobile World Congress (MWC) in Barcelona on Monday.

“Nothing big, because we would much rather consolidate what we have now, and really expand into that next step.”

Ekholm said he expected the company’s enterprise offering to grow “rather fast”, and could eventually offset sluggish demand for its CSP (LON:) offering.

“Over time, it should compensate for slower, or even negative, growth in our CSP business. It’s so much smaller today but, longer term, clearly the ambition is to have a more balanced portfolio.”

Ericsson, which announced plans to cut 8,500 employees last week, has seen overall margins erode as growth now mainly comes from fiercely price competitive markets such as India and its once big China market has slowed to a trickle.

The promise of future growth in enterprise business has attracted telecom equipment makers hit by a slowdown in demand as mobile operators put a brake on new orders while they use inventory built up during the pandemic. 

Ekholm expects demand to recover over time as network traffic growth continues to rise. “The reality is you still need to build out over time,” he said.

“We have 90% plus of sales from CSPs… we need to build on that strength that is always central [to the business].”