Ericsson has agreed to sell its IoT business, including its IoT Accelerator connectivity management platform and Connected Vehicle Cloud platform, to California-based IoT provider Aeris. The Swedish firm said its IoT business, expected to post net sales of SEK 0.8 billion ($76.85 million) in 2022, has been the “key driver of the losses” in its ‘business area technologies and new businesses’ division, part of its enterprise business.
Implicitly, Ericsson acknowledged its IoT adventure has failed, only tapping a “limited part of the value chain”. The fee for the deal was not disclosed, but a press statement suggested, effectively, Ericsson was keen to extricate it from the complex small-margin discipline of IoT selling. It follows parallel moves by multinational tech firms to quit IoT, notably IBM and Google; rumours abound that other hyperscalers and vendors will “soon to join the camp”.
Ericsson said the move accelerates consolidation in the “rather fragmented” cellular IoT market. The sale will “eliminate losses” of SEK 0.25 billion ($24 million) per quarter, it said, and see a one-time hit of SEK 1.1 billion ($96.2 million) to its profits (EBIT) in the fourth quarter of 2022, most of it registering in the first quarter of 2023. Ericsson will acquire a “small stake” in Aeris with the transaction – ostensibly to provide support with “transition services”.
The deal is to close at the end of the first quarter of next year. All IoT staff at Ericsson will become part of Aeris when the deal closes, along with associated IoT assets. Ericsson assured mobile operators, which Ericsson support and use the IoT Accelerator platform with/for global IoT roaming, that the trade “will result in a strong partner that continues to provide their customers with a leading IoT connectivity platform”.
It said Aeris, based in San Jose, will be better positioned to innovate, as well, by providing “new value-added services to help grow IoT revenue streams”. It stated: “With the cellular IoT market being a rather fragmented sector, a consolidation of two industry leading players is expected to accelerate the IoT market overall.” It noted, as well, that traditional cellular IoT, mostly for low-power sensors, will be a “fundamental and growing part” of the 5G market.
Åsa Tamsons, head of business area techs at Ericsson, said: “Despite significant investments to address the fragmentation of the IoT market, Ericsson has only tapped into a limited part of the value chain, limiting the returns of such investments. The combined business will offer an unparalleled IoT platform for enterprises and new revenue streams for communication service providers…. Aeris is a good home for our IoT business.”
Ericsson’s enterprise focus will remain fixed on the enterprise LTE and 5G sectors – bolstered notably by its acquisition of US-based Cradlepoint in late 2020, and mostly directed via its traditional operator partners – which jigsaw with the IoT market in the supply of private cellular networks for Industry 4.0, most significantly, but also in the supply of public network LTE and 5G airtime for data-hungry tracking and municipal IoT systems.
The combined IoT platforms, from Ericsson and Aeris, will connect at least 100 million IoT devices worldwide, in 190 countries, said Ericsson. Aeris and traditionally focused on the connected vehicle market, will take charge of IoT connectivity for 9,400 enterprises in total, following the transaction, said a press statement. Aeris, founded in 1996, works already with Softbank, AT&T, T-Mobile, and Vodafone, plus unnamed “leading automotive OEMs”.
But the same statement implied Ericsson is contributing the lion’s share of its total post-transaction business – 95 million devices, 22 million eSIMs, 9,000 enterprises. The IoT Accelerator platform draws on global connectivity agreements with 35 mobile operators. Ericsson’s Connected Vehicle Cloud, described as “the most complete connected car platform on the market”, is used to manage connectivity for six million vehicles in 180 countries.
Aeris’ new scale will afford it a way to navigate complexity and fragmentation, and “further simplify IoT”, said the statement. Tamsons said: “Aeris has been successful in extending its IoT solution offering beyond connectivity and has the right focus, assets, and capabilities to realise the full value creation potential of Ericsson’s IoT business and its strong market presence.”
Marc Jones, president and chief executive at Aeris, said: “Our intelligent, software defined IoT network and Ericsson’s leading connectivity management platform will provide the leading IoT technology stack in the industry. We look forward to bringing these new, transformational IoT solutions and Ericsson’s IoT Accelerator and Connected Vehicle Cloud products to our customers.”
