5G

Could Ericsson hand off its cloud business - like Nokia did?

Nokia made headlines recently with a surprise move to hand off its cloud-based 5G core assets to Red Hat. Its decision to ride primarily on Red Hat's platform rather than continue on with its own – a move designed to allow it to focus more closely on fewer products – raised an interesting question: could fellow telecom equipment incumbent Ericsson follow suit? And if so, who exactly might be interested in buying?

Questions around what might happen to Ericsson’s Cloud Software and Services unit have been swirling since Ericsson announced plans in January to restructure the business and exit subscale products.

The company has indicated during recent earnings calls that its turnaround of the division is going well and it expects to achieve breakeven EBITDA for the full-year 2023. Indeed, Cloud Software and Services revenue was up 11% YoY in Q1 and 8% in Q2 (or 5% and 1%, respectively, on an adjusted basis), proving to be something of a bright spot in the latter quarter as revenue in its powerhouse Networks business fell. So perhaps it has less incentive to sell than if its restructuring were going poorly.

But that doesn’t mean the potential is necessarily off the table. AvidThink’s Roy Chua noted Ericsson does have some assets similar to the ones Nokia just passed off to Red Hat. These include its OpenStack VM and CaaS product lines, with its Cloud Executive Environment, Cloud Container Distribution, Software-Defined Infrastructure and Cloud.

Ericsson declined to comment. But TelcoDR’s Danielle Royston told Silverlinings the company is still interested in buying the vendor’s cloud assets. She first floated the idea in January and told Silverlinings that though Ericsson has been “unresponsive” to contact attempts, “I remain open to buying those assets, still.”

As previously noted, Red Hat is already taking on Nokia’s cloud-focused 5G core products. Asked if it would perhaps also be interested in scooping up Ericsson’s cloud assets, a Red Hat representative told Silverlinings it “cannot comment on hypotheticals.”

However, the representative noted that Red Hat’s deal with Nokia “is not exclusive, we will continue to work within our broader ecosystem, including with Ericsson, to help service providers use cloud-native technologies.”

Asked to weigh in on potential suitors, Chua told Silverlinings a deal between Red Hat and Ericsson is unlikely given the Nokia agreement. But he added “other parties with similar overlapping assets who could take on the support and maintenance include Canonical (Ubuntu), Mirantis, SUSE,” as well as other players like TelcoDR “who are looking to bring a cloud platform in-house.”

Additionally, “some of the global SIs [system integrators] could have interest in those assets, as well as cloud providers looking to migrate these customers over to their platforms,” he said.