Report: Ericsson to buy Entrisphere

Ericsson is likely to acquire access equipment vendor Entrisphere for about $290 million in order to help win a contract to supply AT&T with passive optical networking gear, according to Swedish technology newspaper Ny Teknik. Though not entirely surprising, the move, if true, could make Ericsson a major overnight presence in the North American access networking market.

Swedish telecom equipment giant Ericsson partnered with Entrisphere, a six-year-old start-up based in Santa Clara, Calif., to bid for the gigabit passive optical networking (GPON) business of Verizon Communications and AT&T this year. In March, analysts said the duo had made a “short list” of vendors to be potentially chosen by the Bells. This summer, analysts predicted that Ericsson would acquire Entrisphere if the two won a Bell GPON contract.

Though Verizon eventually chose other GPON suppliers instead (Alcatel, Motorola and Tellabs), AT&T has yet to announce its selections, and some would say it is overdue. Analysts predicted AT&T would name its GPON suppliers late this summer.

“We believe that AT&T wanted to see a stronger bond (i.e., long-term commitment) between [Ericsson and Entrisphere] before deploying equipment for their GPON FTTP build,” said Ken Twist, Ovum-RHK’s vice president of technology consulting and broadband networks.

Twist called Ericsson’s alleged move “a smart one,” adding, “It has the potential to establish Ericsson as a major North American access vendor in a short time.”

“Ericsson provides Entrisphere with the financial and operational scale necessary to help make them a significant player in a crowded access space,” Twist said. “The combined entity will make them the second largest company (with an access portfolio) in North America behind Alcatel.”

“Additionally, since Entrisphere’s platform is multi-service (traditional voice, SIP, H.248, video, legacy TDM, etc.), it is conceivable that they could play a key role in Ericsson’s IMS, wireless aggregation or GSM/IP migration plans in North America,” Twist said.

Entrisphere reportedly partnered with Fujitsu Network Communications when the Bells were looking for broadband PON, or BPON, vendors in 2003. But Fujitsu opted to go it alone for the Bell GPON vendor search that began in late 2005.

In May 2005, privately held Entrisphere closed a $75-million third round of funding, bringing the company’s total funding to more than $170 million.

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