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Ericsson Plans to Buy Kathrein's Antenna & Filters Business

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Ericsson ERIC recently announced that it is going to acquire Kathrein’s antenna and filters business to augment its Radio System portfolio with new products, while bolstering its in-house antenna capability. This marks a vital step in the company’s Networks portfolio strategy. Headquartered in Rosenheim, Germany, Kathrein is a leading provider of antenna and filter technologies, and an existing supplier to Ericsson. The financial terms of the deal, which is subject to customary closing conditions, remained undisclosed.

Notably, the buyout of Kathrein’s business is likely to enhance Ericsson’s competence in advanced antenna domain. With more focus on the antenna and filter business, the company aims to widen its offering to further optimize site space, which is important for the introduction of 5G. Moreover, the strategic move is expected to add nearly 4,000 skilled professionals in R&D, production, and sales based in more than 20 locations, including Germany, Romania, the United States, Mexico and China.

The transaction, which is expected to close in third-quarter 2019, represents an asset deal where certain assets and liabilities are taken up by Ericsson. The acquired business will be added as a separate unit in Business Area Networks and will be reported in Segment Networks, with a positive contribution to 2020 profitability targets. Revenues from the acquired unit of Kathrein were about €270 million in 2018, which exclude sales to Ericsson.

The Swedish telecom equipment maker continues to execute its focused strategy and is well on track to achieve its 2020 financial targets. The company is continuously investing in its comprehensive 5G-ready portfolio to enable communication service provider’s seamlessly migration to 5G technology. It also maintains strong control of its cost position to stay competitive and profitable.

Furthermore, Ericsson’s investments in R&D over the past years have secured a competitive and industry-leading offering. Artificial intelligence and automation remain key enablers for the company’s future business development, creating customer and shareholder value. It remains confident of reaching its long-term target for 2020 and 2022.

Zacks Rank and Stocks to Consider

Ericsson currently has a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the industry include Comtech Telecommunications Corp. CMTL, Harris Corporation HRS and Motorola Solutions, Inc. MSI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comtech has a long-term earnings growth expectation of 5%.

Harris has a long-term earnings growth expectation of 8%.

Motorola has a long-term earnings growth expectation of 8%.

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