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By Supantha Mukherjee
STOCKHOLM (Reuters) – Telecom gear maker Ericsson (BS:) has recorded one other billion-dollar impairment cost for its acquisition of cloud communications agency Vonage in 2021, sending its shares down 2% in early commerce.
Dubbed as one in every of its largest offers in historical past, Ericsson splurged $6.2 billion in money to purchase Vonage to assist it goal enterprise clients because it sought to diversify away from its cellular networks enterprise.
Since then, cellular community income has fallen attributable to decrease demand for 5G gear, Ericsson’s share worth has halved over an Iraq bribing scandal, and it took a $3 billion non-cash cost final yr on the Vonage deal.
“Given deterioration available in the market atmosphere and elective choices we have now made to refocus our investments in strategically prioritized areas, we have now reassessed sure progress assumptions, leading to a non-cash impairment of 11.4 billion Swedish crowns ($1.1 billion),” mentioned Vonage CEO Niklas Heuveldop, who bought the highest job in February.
Vonage is run as an impartial unit of Ericsson.
Ericsson had anticipated Vonage to spice up earnings per share and free money circulation from 2024 onwards, however to this point it has written down $4 billion or about two-thirds off the acquisition worth.
Ericsson paid $21 for every excellent Vonage share, a 28% premium to the earlier closing worth of the inventory and a 34% premium to the common of the final three months, a worth analysts mentioned at the moment was excessive.
“This confirms the thesis of Ericsson having considerably overpaid for the unit in 2021,” mentioned Mads Lindegaard Rosendal, analyst at Danske Financial institution Credit score Analysis.
($1 = 10.4936 Swedish crowns)
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