• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Editor's Pick Aeris’ acquisition of Ericsson’s IoT unit is ambitious in scale and making it profitable will be difficult
Editor's Pick

Aeris’ acquisition of Ericsson’s IoT unit is ambitious in scale and making it profitable will be difficult

by December 16, 2022
by December 16, 2022 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

By Ibraheem Kasujee, Analyst at Analysys Mason.

“Aeris’s acquisition of Ericsson’s IoT unit is a bold move for a small player; it will be challenging to turn the business into a profitable one.”

Ericsson announced the sale of its IoT Accelerator and Connected Vehicle Cloud businesses to Aeris, a USA-based connectivity provider, on 7 December 2022.

The exact financial details were not disclosed, but Ericsson stated that the deal would lead to a one-off SEK1.1 billion (USD107 million) decrease in EBIT and would eliminate quarterly losses of SEK0.25 billion (USD24 million). In other words, the business that Aeris will take control of was losing around USD100 million each year.

The deal is ambitious for Aeris. The connectivity provider will go from managing around 15 million IoT connections to handling over 100 million connections. Its relationships with mobile network operators (MNOs) will also change. It will be a significant challenge for Aeris to turn Ericsson’s loss-making IoT unit into a profitable one.

Aeris has acquired a business that is significantly larger than its own, and that sells to a different customer base

Figure 1 compares Ericsson’s IoT unit to Aeris’s business prior to the acquisition. We can see that the former has a significantly larger number of managed devices and enterprise customers.

Figure 1: Overview of Ericsson’s IoT unit and Aeris’s business prior to the acquisition

Ericsson IoT
Aeris

Number of IoT devices managed
95 million (as of December 2022)
15 million (as of August 2021)

Number of enterprise customers
9000
400

Examples of enterprise customers
Globetracker, Stanley Black & Decker (via Deutsche Telekom) and Voi (via Arkessa)
Chrysler, Fiat, Honda, Mitsubishi and Volkswagon

MNO customers
35 including Bell Canada, China Mobile, Deutsche Telekom, Ooredoo, SoftBank, Telenor, Telia and Telstra
None

Source: Ericsson, Aeris and Analysys Mason

Each player also differs in what it sells and who it sells to. Aeris primarily sells IoT connectivity and connectivity management to enterprise customers, and has a strong focus on automotive vehicle manufacturers such as Chrysler and Volkswagen. Ericsson’s main IoT proposition (IoT Accelerator) consists of an IoT core network combined with a connectivity and device management platform. It sells this service to connectivity service providers, such as Deutsche Telekom and China Mobile, that use the platform to provide IoT services to their own enterprise customers.

Ericsson is disposing of an unprofitable part of its business, while Aeris will use the acquisition to scale up

Ericsson has dedicated considerable time and resources to IoT. Most notably, it acquired Telenor’s M2M Platform in 2011, which provided the backbone of what would become the Ericsson Device Connection Platform (DCP). This was later renamed the IoT Accelerator platform.

Ericsson appears to have concluded that it cannot make its IoT unit profitable. The size of the losses and Ericsson’s view of the unit’s prospects suggest that the options were to either close the unit or look for a new owner. Closing the platform would upset 35 MNOs, including some of the largest in the world, so the appeal of the second option is obvious. It is not clear how much, if anything, Aeris is paying for the assets. Indeed, it is possible that Ericsson is paying Aeris to take control of them.

The acquisition represents an opportunity for Aeris to scale up and generate new revenue streams. Aeris will go from selling directly to enterprises to also selling indirectly via MNOs. It currently competes with some MNOs for IoT connectivity contracts, particularly in the automotive sector, but several of these competitors also use IoT Accelerator and will become customers of Aeris. Aeris will also acquire Ericsson’s Connected Vehicle Cloud unit, which will complement its existing automotive capabilities. This unit currently connects 6 million vehicles.

Aeris will face several challenges in attempting to reverse the fortunes of a loss-making business unit

The acquisition is not without significant challenges for Aeris, including the following.

Size of the new business. Aeris will go from managing 400 customers to 9400, and from around 15 million managed devices to over 100 million. It will have to adapt quickly to the increase in scale and must rapidly integrate Ericsson’s resources.

Relationships with MNOs. Aeris will face two challenges with MNOs. Some view Aeris as a competitor, though Aeris has tended to focus on the USA rather than compete for global connectivity contracts. Nonetheless, Aeris will need to explain how it can be both a platform provider and a connectivity provider. It could potentially formally limit its focus as a connectivity provider to the USA, or could even cease operations in this area all together. Aeris may also struggle to convince MNOs that it is a stable home for the IoT Accelerator business. It will need to demonstrate that it can run a viable platform business, even if Ericsson could not.

Reversing financial losses. Ericsson enjoyed advantages over Aeris regarding its size, reputation and go-to-market channels, but it still could not make its IoT unit profitable. However, Aeris, unlike Ericsson, is fully focused on IoT (IoT accounted for just over 1% of Ericsson’s total revenue). Aeris may be able to be more flexible, make investments and prioritise areas of the IoT Accelerator platform that Ericsson’s IoT unit could not.

The deal repositions Aeris firmly as a IoT platform company

The acquisition is bold on Aeris’s part. The largest IoT MVNOs to-date, such as KORE and Wireless Logic, manage around 10 million IoT connections each; this is an order of magnitude less than Aeris’s scale post-acquisition. However, this comparison with other IoT MVNOs may no longer be valid given the shift in Aeris’s business away from selling connectivity to enterprises to providing a platform to MNOs.

Aeris will have to show its MNO customers that it is a partner, not a competitor, in order to persuade them not to switch to an alternative IoT platform, such as Cisco IoT Control Centre, Nokia WING or one from any number of smaller platform providers. More importantly, it will need to quickly demonstrate that the IoT Accelerator is a long-term, viable proposition under its ownership.

The acquisition could give Aeris an opportunity to develop an established platform with a level of flexibility and agility that was not possible while it belonged to Ericsson, despite these challenges.

Source: Analysys Mason

The post Aeris’ acquisition of Ericsson’s IoT unit is ambitious in scale and making it profitable will be difficult appeared first on IoT Business News.

You Might Also Like
  • TGI Fridays-branded chicken bites sold at grocery stores nationwide recalled due to plastic contamination
  • July 4 travel hitting a record thanks to lower gas prices, humming economy
  • Sierra Wireless Announces New 5G LPWA HL7900 Module Integrating Sony’s Altair ALT1350 Chipset
  • ESPN, Fox and Warner Bros. Discovery to launch joint sports streaming platform this year
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Scientists Plan to Stop Livestock Diseases and Cattle Theft with 7 Million 5G-IoT Devices Connected to Satellite Constellation
next post
Sierra Wireless Offers Critical Communications Solution for First Responders and Extended Public Safety Users with FirstNet

You may also like

First Republic’s stock sinks as analysts monitor banking sector stress,...

April 26, 2023

Patriots owner says ‘Jew hatred’ on U.S. college campuses parallels...

April 27, 2024

Nvidia’s CEO did a Q&A with analysts. What he said...

March 21, 2025

Heineken CEO on Bud Light campaign fallout: ‘You need to...

August 2, 2023

Their small businesses went viral on TikTok for the wrong...

May 25, 2023

Fibocom to Launch the Leading-Edge 5G Sub-6GHz and mmWave Module...

March 9, 2023

Disgraced Theranos founder Elizabeth Holmes is booked into prison in...

May 31, 2023

Intel CEO retires as chipmaker loses ground in AI revolution

December 3, 2024

Disney posts mixed results for quarter plagued by streaming woes,...

August 10, 2023

AT&T, other phone companies sued over stolen nude images could...

July 30, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,630 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Google forcing some remote workers to...

    April 24, 2025

    Cash App owner Block pays $40...

    April 11, 2025

    McDonald’s preparing a 2025 ‘McValue’ offering

    November 21, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here