Ericsson Strengthens Fiber Network Business With Abentel Buy

In a bid to further boost its comprehensive fiber services portfolio, Swedish communication technology and services giant Ericsson (ST:ERICAs) (NASDAQ:ERIC) recently inked an agreement with technology firm Abengoa for the acquisition of its subsidiary,Abentel.

Ericsson’s shares did not react favorably to the news. The deal, the financial details of which were kept under wraps, is expected to close during the third quarter.

Per the activities transfer agreement, Abentel's assets, projects and employees will be transferred to Ericsson. Ericsson will gain roughly 500 services professionals, skilled in fiber networks roll-out and maintenance services. This will help the company expand its footprint in the emergent field of fiber-related services.

Fiber is a vital element for the next generation all-optical IP network. Ever increasing bandwidth requirements, driven by new applications is increasing the demand for fiber-optic transmission. Per an Ericsson Mobility Report, about 85% of data traffic generated with usage of video apps in smartphones goes over Wi-Fi, mainly indoors.

The deal will integrate the tools, competence and process of both companies, thus creating a global hub for fiber services. The acquisition will enable Ericsson to leverage Abentel's competence and skills and reinforce its dominant market position, as it continues to drive growth in this field.

Abentel's capabilities and Ericsson's world-class service will together offer unparalleled scalability to their customers.

Ericsson presently offers fiber network planning, design and roll out as a managed service. It is the world’s largest supplier of LTE technology, and about 40% of the world's mobile traffic is carried over Ericsson networks. Furthermore, Ericsson has a solid network of partnerships to facilitate competitive supply and provisioning of broadband access solutions.

Ericsson’s shares have fallen about 27% in the past one year.

Stiff competition and currency fluctuations have been weighing on this Zacks Rank #4 (Sell) company’s performance lately. Ericsson is also grappling with waning sales in some key end-markets, slowdown in 4G deployment in China and ongoing industry consolidation among customers and major rivals.

Some better-ranked stocks in the broader computer & technology space include ServiceSource International, Inc. (NASDAQ:SREV) , Exa Corp. (NASDAQ:EXA) and Nuance Communications, Inc. (NASDAQ:NUAN) , each sporting a Zacks Rank #1 (Strong Buy).