Ericsson says it will sell its Lynchburg, Va., cable modem business to Aastra Technologies Ltd. of Ontario, Canada. Financial terms were undisclosed, although the unit's Q3 revenues are at about $20 million.
Ericsson's cable modem business has focused primarily on developing one specific product, its PipeRider cable modem, says spokeswoman Kathy Egan. The company sold its first cable modem in mid-2000, she adds, but had been developing it for two years. Time Warner Cable is among Ericsson's cable modem customers.
Like many in the industry, Ericsson is shedding its noncore businesses. Earlier this year, 3Com decided to bolt from the residential cable and DSL modem markets as margins on the gear continued to drop.
"Ericsson is leaving the business since the modem has become a commodity product with low margins, and it is not part of our core business," she says. "Therefore, cable modems are not strategically vital for Ericsson."
According to sources familiar with the situation, Ericsson tried to buy cable modem market share earlier this year by dropping unit prices below $100.
For its part, Aastra's business focus is access terminals, says CFO Brett Allan. In May, the company bought Nortel Networks' MBS Centrex and ISDN terminals business for $28 million and in September, it purchased Lucent Technologies' digital video business for about $17 million. The cable modem business brings in a broadband data access angle.
As the industry moves toward convergence of voice, video and data, he says, "We're positioning ourselves as a supplier of access devices."
Allan says financial terms will be included in Aastra's financial reports in April.
Under the deal, Aastra will buy the inventory and assets, and "assume some liabilities," Allan says. It plans to "continue the investment and development (Ericsson) was doing in the cable modem market."
Allan says the unit will continue in its Virginia facilities, and Aastra plans to take on a "significant number" of the 100 people employed there. It's too early to tell, he says, if there will be layoffs or closures.
The deal should close in early December, he says.