Ericsson slashed the value of its Vonage Holdings assets in half but remains optimistic that the API and enterprise-focused nature of that business will be a fiscal boon down the road.

The Sweden-based infrastructure giant will take a nearly $3 billion non-cash impairment charge in its enterprise business segment for the third quarter of this year. Ericsson noted the charge represents “50% of the total amount of goodwill and other intangible assets attributed to Vonage.”

It attributed the charge to the “significant drop in the market capitalization of Vonage’s publicly traded peers, increased interest rates and overall slowdown in Vonage’s core markets.”

Despite the obvious negative connotations tied to the write-down, Ericsson said Vonage is a sleeping giant.

“Ericsson continues to advance its enterprise strategy, with Vonage’s network API capabilities being central to this strategy and the development of a global network platform,” the company wrote. “The impairment does not alter Ericsson’s positive outlook on the … market potential.”

That market potential is based on network APIs, which have gained increased attention over the past six months. This model calls for the use of open industry standards that will allow 5G telecom operators, network equipment and software vendors to tap into the expansive developer community and drive new revenue streams.

Niklas Heuveldop, president and CEO of Ericsson North America, told SDxCentral in an interview late last year that the Vonage deal unlocked access to “millions of developers and 120,000-plus enterprise customers northbound, and southbound we have all the networking expertise we need.” This allows Ericsson to now accelerate the development process through this entire Ericsson-controlled stack to drive innovation and understanding.

“Vonage understands the language developers speak and how APIs need to be packaged and tailored toward the gamer community and manufacturing community with the proper SDK wrapped around it,” Heuveldop said.

Ericsson has since repeatedly touted this market opportunity, though it has also revised its expectations.

“Like all new markets, it will take some time to build this new market as well, but we believe it can actually develop faster and grow bigger than the market for traditional communication APIs, and it will position Ericsson for long-term growth and profitability,” CEO Börje Ekholm said during an earnings call earlier this year. The vendor this week added that it expects the first revenues from network APIs by year-end.

Those revenues can’t come soon enough.

Ericsson’s $6.2 billion acquisition of Vonage immediately drew skeptics when it was announced in late 2021. Many questioned how an enterprise-focused API company fit into the vendor’s telecommunications equipment operations.

“On paper it looks a little bit like square peg, round hole,” Zeus Kerravala, founder and principal analyst at ZK Research, told SDxCentral at the time.

Dell’Oro Group VP Stefan Pongratz also expressed some slight bewilderment about the deal due to a lack of clear synergies with 5G connectivity. “With carrier revenues now growing at the fastest pace in 10 years, and operators and suppliers slowly coming to terms with the fact that connectivity is a profitable business with upside potential if done right, it is somewhat surprising to see this pivot,” he wrote in response to questions.

“The enterprise Wi-Fi access point installed base is roughly one-thousand times the size of the private wireless LTE/5G small cell installed base, meaning we have a long way to go when it comes to LTE/5G connectivity in the enterprise,” Pongratz added.

Others saw the move similar to how Ericsson’s management positioned the deal, stating it could open up new revenue opportunities for the vendor.

GlobalData’s John Byrne thought the deal provided Ericsson with a “significant arsenal” to further expand into the enterprise segment, pointing to Vonage’s developer community as one the biggest benefits for Ericsson.

“As 5G continues to evolve, these developers could jumpstart development of more sophisticated network slice use cases,” Byrne wrote. “I think the acquisition is likely to have enterprise customers view Ericsson in a different light. To succeed they will need to make sure that the developer community remains educated and provide incentives to encourage Vonage developers to become loyal Ericsson developers.”

Ericsson’s management has repeatedly used this line of thinking to rationalize the deal’s financial obligation.

“In an ideal world we would not have had to buy Vonage for $6.2 billion to unlock some of the hang up in the system,” Heuveldop told SDxCentral last year. “The reality, however, is that when I talk to our partners, they get phone calls, and they talk to their developers and they’re just wondering and scratching their head about what’s all this excitement about 5G? I don’t get it. Then they come to us and say, 'what’s all this excitement about 5G? What do I tell my developers?' And then we look at each other and say, well, that’s strange because you have latency, you have network slicing, you have all these amazing capabilities. What part of that do developers not understand?”

Ericsson is sure to provide more details on the move as part of its Q3 earnings call next week.