Ericsson has acquired the CDMA EV-DO business of Airvana, with which it has been engaged in a legal battle since February 2012.
The Swedish vendor was sued by CDMA pioneer and small cell maker Airvana last year, for allegedly refusing to pay licensing fees that were due under a previous deal with Nortel (whose infrastructure assets Ericsson acquired). In March, a court imposed a preliminary injunction on the larger firm, which possibly found it less troublesome to buy its antagonist than continue to pay the lawyers. The stock purchase’s price was not disclosed.
Airvana will retain its small cell business while offloading its EV-DO macrocell unit. “With over a million small cell units deployed in customer homes and offices, Airvana has the experience and technology to lead this exciting market,” said chairman Randy Battat, while Ericsson said the transaction will ensure ‘long term support for Ericsson`s CDMA customers’. It has also taken over 38 Airvana employees.
Ericsson entered the CDMA networks business in 1999 as a result of settling a long standing licensing battle with Qualcomm, and taking over the chip giant’s infrastructure activities. However, it exited the space a few years later when it failed to secure significant market share against the main players, Nortel, Lucent and Motorola. It then re-entered in 2009 when it snapped up many of Nortel’s wireless networking assets after the Canadian firm’s bankruptcy. Gaining a CDMA portfolio was strategic because it enabled Ericsson to target the major CDMA operators ‘ typically the early movers in LTE migration ‘ for 4G upgrade projects. The success of that decision was seen in its major wins at Verizon and Sprint.
“We recognize that CDMA will continue to be an important technology in the operators` networks,” said Paul Challoner, head of Ericsson’s CDMA Radio product.
Ericsson and Airvana will now jointly seek dismissal of the lawsuit filed by the latter in the Supreme Court of the State of New York. This alleged breach of contract, claiming the Swedish giant was bypassing software fees which were agreed in a licensing deal with Nortel.
Airvana licensed its EV-DO radio hardware and software to Nortel and the Canadian firm initially resold the products to major customers like Sprint, and later agreed to make the hardware itself, provided it used only the Airvana software. Airvana claimed Ericsson was using alternative software, depriving Airvana of its licensing revenue, and selling a ‘knock-off’ version of the EV-DO product. This put the smaller vendor’s CDMA business ‘in jeopardy’ as Ericsson was its only major customer, said the suit.
At the time of the lawsuit being filed, Ericsson had earned revenue of more than $2bn since 2009 on the sale of products incorporating Airvana’s technology, resulting in licensing revenue for Airvana of $200m a year in 2010 and 2011, but had pushed for the fees to be reduced significantly.