Acquisition of Marconi

During the 1990s and the crisis years, Ericsson divested a large number of operations, partly to streamline its operations, partly because it had to. But the growing convergence between different systems meant that some of the expertise that had been divested had again become interesting. And Ericsson’s increasingly well-filled coffers put it in a good position to make acquisitions.

One of these was to involve the well-known company Marconi. In October 2005, Ericsson announced that it had acquired a major holding in Marconi for SEK 16.8 billion.

After numerous transformations and deals, Marconi was no longer the company it had once been; for instance an expensive acquisition of American company Fore Systems – which Ericsson had refused – had been a disaster. Marconi’s main focus was now on fiber-optic networks, using technologies designated by the acronyms SDH and WDM. One of these referred to transmission equipment based on synchronous digital hierarchy (SDH) for high-speed digital communication between telephone exchanges and other network nodes via optical fiber and radio links; the other an optical solution based on wavelength-division multiplexing (WDM), which raises the capacity of existing fiber networks.

Ericsson had developed its own SDH products up until 1995 and WDH products until just after 2000, but had phased them out and in both cases started to distribute Marconi equipment instead. Now investments in triple play in particular were leading to increased demand for WDM technology.

Carl-Henric Svanberg said of the deal: “Ericsson and Marconi know each other and are successful partners. We are uniting two telecommunications pioneers who have more than two centuries of experience in the industry between them.” 

Author: Svenolof Karlsson & Anders Lugn

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