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Ericsson Boosts Mission Critical Business With Genaker Buyout

Zacks Equity Research

Ericsson ERIC recently announced the acquisition of Barcelona-based company, Genaker, which is a leading provider of critical communications solutions. The strategic buyout is likely to boost the Swedish communications equipment maker’s presence in Spain and drive its goal of fortifying its capabilities in the mission critical ecosystem, especially in the face of rapid technological advancements.

Per the deal, Ericsson will acquire 100% of Genaker’s shares to invest in its much-acclaimed technologically-driven Mission Critical Push-to-talk (MC-PTT) solutions. Being a longtime proponent of open, standards-based communication platforms, Genaker’s MC-PTT solution delivers enhanced communications and connectivity for Public Safety needs to improve situational awareness and simplify operations. Moreover, the innovative network also supports rapid private and group communication, thereby making it possible to communicate on the go, without disrupting the normal workflow.

The acquisition is primarily aimed at bolstering Ericsson’s MC-PPT unit as the sector is currently undergoing radical change from being legacy land mobile radio networks to next-gen cellular networks. Moreover, due to the advent of a significant technological shift, the acquisition is considered to be a foundational stone to address the high-end requirements of mission-critical users and public sector entity customers. Per this deal, Ericsson will support the transition of Genaker’s 30 employees. Financial terms of the deal have not yet been disclosed.

As a leading provider of mission-critical communication products and services worldwide, Ericsson has ensured a steady revenue source from this niche market. It aims to reinforce position in the public safety domain by working with other players in the ecosystem.

Currently, Ericsson is witnessing healthy momentum in its business on the back of the strategy to increase investments for technology leadership, including 5G. In Networks segment, the company’s ongoing activities are focused on investing in R&D to safeguard a leading product portfolio and cost leadership; increase investments in automation and serviceability driving down costs; and selectively gain market shares based on technology and cost competitiveness.

Ericsson is on track with its 2020 and 2022 financial targets while making progress toward building a stronger company in the long term. In addition, it is well on track to achieve its 2020 financial goals with a comprehensive 5G-ready portfolio to enable seamless migration to 5G technology. AI and automation are key enablers for future business development, creating customer and shareholder value.

Shares of Ericsson have lost 33% compared with 27.4% decline recorded by the industry in the past three months.



Zacks Rank & Stocks to Consider

Ericsson currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader industry are Comtech Telecommunications Corp. CMTL, Telenav, Inc. TNAV and Perion Network Ltd. PERI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comtech exceeded estimates in the trailing four quarters, the positive earnings surprise being 85.9%, on average.

Telenav outpaced estimates twice in the trailing four quarters, the positive earnings surprise being 77.1%, on average.

Perion surpassed estimates in the trailing four quarters, the positive earnings surprise being 87.9%, on average.

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