As part of its push into multimedia, Ericsson acquired two companies based in Silicon Valley.

In December 2006, Ericsson announced that it had made a cash offer amounting to SEK 13 billion for the listed IP- technology company Redback Networks. This company, founded in San Jose in 1996, specialized in edge-router technology (edge routers are found close to end users, as opposed to core routers) and had a staff of about 800, most of them engineers working in research and development. It had just over 700 customers among operators in 80 or so countries.

Fifteen of the 20 most important operators in the world were using Redback technology to handle IP-based data, voice and video services. Svanberg said when the deal was made public: “The rate at which IP is being rolled out is rising thanks to the operators’ focus on converged, all-IP networks, where telecommunications-grade performance demands increasingly intelligent routers with high capacity.”

 The next acquisition, of Entrisphere, was announced in February 2007. Entrisphere, founded in Santa Clara in 2000, had a staff of 140 and specialized in fiber access and in particular GPON, Gigabit Passive Optical Network, the leading fiber-optic standard. The price was about SEK 2 billion.

Ericsson’s press release said: “Fiber technology is a critical part of the next-generation access network and the industry-leading standard is known as Gigabit Passive Optical Network (GPON) ... With its GPON solution already in service in North America and the system being evaluated for deployment by leading telecom carriers around the globe, the acquisition forms an important cornerstone in Ericsson’s Full Service Broadband offering.”

For Ericsson, two things in Silicon Valley were of the utmost importance – both related to the convergence of mobile and fixed internet. It is from here that the device industry and development of applications are driven, mainly through Apple and Google, and converging IP networks, those that deal with both mobile and fixed internet, are booming.

Uddenfeldt says: “Mobile broadband is growing faster than ever and so it is natural to produce the same kind of routers for mobile and fixed networks.” 

HOSTILE BID FOR TANDBERG

Three Nordic acquisitions were also made in rapid succession. The largest was the purchase of the listed Norwegian company Tandberg Television for just under SEK 10 billion.

The bid for Tandberg Television on February 26, 2007, was described as a hostile one. A month earlier, its management and board had unanimously recommended a bid from the American company Arris. Ericsson’s bid was just over 10 percent more and turned out to be enough to get the required majority holding.

Tandberg Television was a world leader in supplying the video head-end, encoding and compression technologies that were needed to ensure high image quality and minimal bandwidth in video applications and therefore an important component in IPTV solutions.

Tandberg’s customer stock, dominated by cable and satellite operators, covered just over 100 countries. The company owned more than 200 patents and almost half of its staff of 870 were video or software engineers. The analysts reacted positively; cross-sales of Ericsson products to cable television companies and television stations should benefit Ericsson in the long run, said one.

Two other acquisitions in the spring of 2007 were the Swedish company Mobeon, described as a world leader in IP-based voice and video messages, and Drutt, which had developed a platform for mobile services.

Mobeon could trace its roots back to Ericsson. It was the company to which Ericsson had sold its system for IP messages in 2003. Drutt was a former Telia company; its work had including developing the DOF and Halebop mobile portals for Telia.

Author: Svenolof Karlsson & Anders Lugn

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STANFORD UNIVERSITY, IN THE HEART OF SILICON VALLEY

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