Ericsson acquires Entrisphere

Ericssson today announced its acquisition of fiber access equipment vendor Entrisphere.

“Fiber technology is essential for high-definition IPTV and other IP-based services,” Ericsson said in a statement released today. “Entrisphere has a well proven and competitive product portfolio, ready for large scale deployment.

Terms of the deal were not immediately disclosed. Six-year-old Entrisphere, based in Santa Clara, Calif., employs about 140 people.
Ericsson is likely to leverage its acquisitions of both Entrisphere and another U.S. equipment firm, Redback Networks, to gain share in the IPTV and broadband access markets.

Rumors that the Swedish networking giant would acquire Entrisphere surfaced last November. At the time, some analysts conjectured that AT&T--which was expected to announce its chosen suppliers of gigabit passive optical networking gear last year but made no announcements—had short-listed Entrisphere but wanted it to have more than a big-brother partner.

“Ericsson provides Entrisphere with the financial and operational scale necessary to help make them a significant player in a crowded access space,” Ken Twist, Ovum-RHK’s vice president of technology consulting and broadband networks, said in November. “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.

The notion of Ericsson acquiring Entrisphere as a way of penetrating the North American wireline market in particular would be “puzzling,” Twist said in a note issued today. A better choice under those circumstances--though considerably more expensive--would have been Tellabs, he said. “[The Entrisphere acquisition] certainly gives [Ericsson] a shot at some AT&T GPON business, but the volume is not guaranteed, and you still have Tellabs, Motorola, Alcatel, and perhaps Calix to contend with. Also, Entrisphere is being marginalized in the only two significant accounts they've won over the past few years--Embarq and TDS. We believe that Ericsson would have to re-tool Entrisphere and invest more in their [broadband digital loop carrier/multiservice access platform] capabilities in North America to erode market share from Alcatel, Tellabs, Calix, Occam, Telstrat and others generating more revenue.”

Last week, Embarq executives told a local newspaper they had no plans to offer fiber-based video service any time soon, citing the low density of users in its network footprint.

“If [Ericsson’s] goal was to add another weapon to their FTTP portfolio (Ericsson already has an Ethernet-based solution) with GPON in North America, Europe (they are pitching Entrisphere’s GPON solution to [France Telecom]) and Asia with an IP-based PON product that can support legacy services, Entrisphere might be a good fit,” Twist said.

Peter Linder, head of Ericsson’s end-to-end network solutions group, told Telephony this morning the company chose Entrisphere in part because it was “one of the few, if not the only platforms” that satisfies the requirements of both North American carriers and those overseas.

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.