This tech company just sold to a Swedish company for $1.1b. What it means for Boise
The $1.1 billion sale of Cradlepoint was finalized Monday, with the Boise tech company becoming a standalone subsidiary of Swedish giant Ericsson.
“We couldn’t think of a better fit for where Cradlepoint was going to wind up, based on the business we’re in,” Cradlepoint CEO George Mulhern told the Idaho Statesman in an interview. “I think it bodes really well for all of the employees of Cradlepoint, all of our customers and for the Boise community. We couldn’t be more happy with where we landed.”
Cradlepoint was founded in 2006, drawing talent from Hewlett-Packard.
“And so the original employees, the original founders, were all based in Boise,” Mulhern said. “And once you live in Boise, it’s a hard place to leave.”
Cradlepoint got its start providing Wi-Fi hotspots for traveling professionals, but quickly expanded beyond that.
The company makes software-based 4G and 5G cellular routers for businesses and the software that goes with it. Network engineers have the ability to manage all of a company’s routers from a single computer dashboard.
Cradlepoint’s wide-area network technology helps connect devices over LTE and 5G networks across a wide swath of industries and situations — including secure Wi-Fi for students on school buses; location tracking and other technologies aboard first responder vehicles; credit card transactions, digital signs, and kiosks in retail; telehealth and remote medical diagnostics in healthcare; and remote monitoring of data gathered from sensors.
The Cradlepoint name dervies from the company’s first product, a cradle that transformed a cell phone into a Wi-Fi access point. The company has 700 workers. Close to two-thirds are based in Boise.
Mulhern and other company executives above the director level took pay cuts because of the coronavirus pandemic, no one was laid off. Sales rebounded, and Cradlepoint recorded 40% growth in the third quarter compared with the same quarter a year ago, he said.
In fact, the company added 100 new employees in the last two or three months, as the deal with Ericsson was being finalized. And that trend is expected to continue.
“We have very significant hiring plans for the Boise site in 2021 and other sites as well,” Mulhern said. “A big part of this is going to be for international expansion.”
About 95% of Cradlepoint’s business is in North America. Ericsson does business in 180 countries and has more than 100 5G contracts with carriers around the world, which Mulhern said will benefit Cradlepoint.
Two weeks ago, Ericsson announced its quarterly income rose 1%, to $6.6 billion. Sales grew 7%, fueled by 5G sales in China, where Ericsson partners with the top three service providers.
On Wednesday, BT, Britain’s largest telecom provider, announced a deal to use Ericsson’s 5G radio antennas, base stations and other equipment to upgrade its mobile network. BT said it expects in time for 50% of its 5G traffic to be transmitted through Ericsson’s equipment. It follows the British government’s ban on products from embattled Chinese company Huawei.
Business reporter John Sowell asked Mulhern about the sale to Ericsson, the company’s technology and its prospects for the future.
Question: Can you explain what a wide area network is?
Answer: Our solutions are used to connect branch offices, vehicles and things back to a company headquarters, over that network back to the internet back to applications they need. And so just like you would find with your mobile phone, you’re using the Verizon network to connect to applications and those types of things.
Well, what we do is we provide a networking solution to do that for applications that an enterprise might use, like Office 365. And so we have a router that gets placed in that branch office or in the vehicle. And then that’s used to communicate to your applications or back to your headquarters or whatever, and it uses the cellular network.
So the same thing you use for your mobile phone, we use to create a high performance secure, highly reliable enterprise network.
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Q: What is Ericsson going to receive from your company that they didn’t have before?
A: If you look at Ericsson’s business, they sell directly to those carriers like Verizon, AT&T, T-Mobile. So we sell through a channel to the actual enterprises. Forty percent of the Fortune 500 buy from Cradlepoint for networking solutions. All brands you would recognize.
This enables Ericsson to extend that network out to the actual enterprise itself. We’ve built our business around taking those cellular networks that were really initially designed for consumer applications, like your mobile phone. And as I said, turning that into a very reliable, enterprise-grade solution. We’ve done all that without really any visibility into the core of that network that sits inside the carrier.
So what we now get to do with Ericsson is they develop that core. So we will have all kinds of insight into what’s happening on that network that we’ve never had before. We’ve always had to reverse-engineer it. Now we’re owned by the company that creates that network.
And so we will have a tremendous amount of insight into what how it’s performing, where it might be having issues. And then we can take that information and create a quality of experience for customers, especially when 5G hits. That is way beyond what they have today.
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Q: Whenever there’s a merger, there are questions about whether a local operation will survive or whether at some point it goes somewhere else. What can you say about that?
A: Historically, that has been an issue in Boise, where startups get to a certain stage, get acquired, and they don’t really have the critical mass to sustain that site, and it fades over time.
Cradlepoint grew to a critical mass where we have 700 people. We’re a real company now, we have hundreds of millions of dollars of billings. That certainly is important.
The other thing is that Boise is now is a very attractive market for technology, people, technology companies. Ericsson is excited about being in Boise. They want to invest in the community here and into the site. So I see this as a long-term, great thing for the Boise community in terms of jobs and opportunity.
And being home, frankly, to one of the most revolutionary technologies to hit telecommunications in 50 years, will be headquartered right here out of Boise, Idaho. I think it’s an exciting thing for the community.
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Q: It looks like 5G is where the future is headed. What role will Cradlepoint play in that?
A: Our enterprise networks will provide the backbone for that for the enterprise, utilizing the cellular networks.
When you think about 5G, it’s going to have fiber-like speeds, but with all the flexibility and agility of wireless, and be able to transmit massive amounts of data in milliseconds with very low latency. So, you know, things like virtual reality, augmented reality, all those things are going to become much more commonplace.
And I think it’s going to be a boon for entrepreneurs. When LTE first hit, nobody thought about an application like Uber. LTE is what enabled Uber. So there’s going to be so much innovation that grows up around 5G. And, again, we see just a big, big opportunity to play a major role in that.
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Q: Can you talk about that Uber experience? What that allowed them to do?
A: . Well, you had to have the performance to track your vehicles using GPS over cellular. You had to have a mobile application that could give you a real-time application. And so LTE was a much higher performance version of 3G. Well, 5G is going to be that on steroids. When you can move information much more quickly and not have to be tied to a cable, the opportunities are as big as people’s imagination.
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Q: How soon do you see that is becoming widespread? Verizon talks about its 5G and T-Mobile says, no, they’re not there yet. How long do you envision it being before it’s pretty common and we start seeing those applications?
A: I think from a network buildout standpoint, over the next couple of years it’s going to get pretty prevalent. There’s a real race on between the carriers, which is why you hear them all saying on their commercials: no, no, no, we have it. No, we have it. There’s a race to get 5G deployed.
Over the next three to five years, you’re going to see a tremendous amount of innovation around 5G and have it fully deployed so that it’s an everyday kind of technology.
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Q: One of the drawbacks, historically has been that rural areas aren’t as wired as cities. Will 5G help with any of that, or will the technology still be lagging in in certain areas?
A: Absolutely. LTE has expanded its reach. We have customers partners of ours, they’re using drones, for example, to deliver medication into remote areas, because they have connectivity on LTE. We have donated some product to a village in Sierra Leone, where they have no running water, no electricity, but they have five bars of LTE. And so now they’re on the Internet creating global businesses.
I think there’s a big opportunity to reach rural areas with with a wireless broadband solution that is going to provide connectivity of folks that have had a hard time getting it before. I expect we’ll see a lot more coverage.
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Q: What is your future with the company as it moves forward?
A: I’ll stay as long as they’ll have me.
I feel like we just got to the starting line as a company. And, I talked about the fact that this is going to be a revolutionary technology. I’m committed to the company, I have a commitment that I feel strongly to the employees of Cradlepoint and even to the community to make sure we get this off on the right foot.
And so I’m excited about this next chapter. I think the entire leadership team of Cradlepoint is signing on to stay on and think we have an opportunity right here in Boise, Idaho, to build a global technology company that is gonna be lasting and sustain a lot of jobs and create a lot of innovation in the market. So it’s pretty exciting for us.
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Q: What conditions did you have in mind for this sale to take place?
A: The most important one of those was structuring this partnership, this acquisition, in a way that Cradlepoint could still be relatively independent.
A lot of our success has been our ability to move quickly, our ability to be agile, as things change. We’ve kind of built the company around the fact that when you’re in a high-tech growth market, it’s the companies that learn faster and execute better that win. That speed and agility comes when you’re more independent as a smaller company. So that was a key part of it. That’s why we’re still going to be Cradlepoint, running us as an independent subsidiary. And they value that ability to move quickly.
This year was a perfect example of the need for agility. In March, we introduced an entire new product line around how to support COVID-19 relief efforts. Getting pop-up clinics in place, drive-through testing in place, remote temperature monitoring, all that utilizing the cellular network, all cloud-managed.
So for a doctor with no technology experience, we could ship one of our products, it would come with a SIM card loaded, already configured. He just had to plug it in, or she had to plug it into power. And it would power up and they would have a network so they could upload their testing results.
We have a new product line for work from home that we didn’t have six months ago. It’s being able to learn what’s happening in the market, learn what’s going on with your customers, and then react quickly to satisfy those needs.
One of our customers is Pandora, a jewelry company that’s in a lot of malls. Well, they used our solution to go out onto the curb. And they’re serving customers from the curb of the mall, instead of having them come into the mall. They had to expand their network out to the curb to do that.
That’s why we talk about our solutions is providing an elastic edge. You can expand your network wherever you need it, whenever you need it. And that’s the value that wireless provides.
This story was originally published November 2, 2020 at 6:00 AM.
