Now that the dust has settled on Ericsson’s seemingly out-of-nowhere $6.2 billion acquisition of Vonage, it’s worth considering other potential companies Ericsson could have targeted. Could that $6.2 billion in cash have been better spent on other enterprise companies, software vendors, or equipment manufacturers more directly involved in mobile network infrastructure?

Ericsson CEO Börje Ekholm, during yesterday’s conference, made it clear the company’s largest acquisition to date is designed to fuel growth in the enterprise market, a hugely valuable segment that telecom vendors and operators have long coveted but have yet to break into at a significant scale.

Investors have yet to buy into that vision, as Ericsson’s stock remains down nearly 6% since the company announced the deal. Enterprise IT isn’t a natural fit for the wireless industry, but it’s widely regarded the most potentially uplifting market by industry stalwarts and upstarts.

The outcome of this blockbuster purchase, not unlike any others, rides on execution.

“I believe they are buying Vonage to diversify away from the tepid growth in telecom and connectivity. They are trying to be less dependent on telecom and want to capitalize on the changing enterprise environment,” Dell’Oro Group VP Stefan Pongratz explained. 

“The real question is, if they are trying to become a high-tech company in the enterprise, is Vonage the best play? The price tag is steep but at the same time no one knows what the enterprise will look like 10 years from now,” he added. 

Although the move is “somewhat risky” because platform services are not a core competency for Ericsson, the deal is “quite innovative,” according to Patrick Filkins, research manager at IDC.

“It’s not just about enterprise wireless. Vonage is used by more than 200 communications service providers (CSPs) globally that pay in to use the platform. Vonage is an intermediary service that sits between the CSPs and enterprises, both of which can be monetized,” he wrote in response to questions. 

Filkins is especially impressed by the signals Ericsson made as part of this deal, particularly its plan to reconfigure Vonage to be “northbound friendly to upcoming CSP 5G API gateway services, which are unlocked by network exposure.”

5G standalone cores include a feature set that allows operators to expose these network APIs and sell access accordingly, he explained. This requires a platform that puts tools into the hands of developers, replicating a framework and approach developers have relied on since the inception of APIs, he added.

“Most CSPs do not have their own platform to do this. Ericsson is stepping in to make that happen, and of course benefit from the need for this platform,” Filkins noted.

A platform that delivers network APIs and acts as a conduit between network operators and enterprise developers is what’s needed to unlock programmable, real-time 5G services, according to Filkins. “It will also help developers and enterprises be able to program their own 5G network slicing parameters, as opposed to relying on the CSP itself to do all that, which kind of defeats the purpose of real-time communications.”

Will Townsend, senior analyst at Moor Insights & Strategy, also took a largely optimistic view of Ericsson’s vision, particularly for its ability to complement Ericsson’s $1.1 billion Cradlepoint acquisition last year. The combination of both deals “give Ericsson momentum to compete with Nokia's enterprise [business unit] for private wireless opportunities,” he explained.

He did, however, ponder how Ericsson could have made a splash by targeting other companies for acquisition, particularly those in the nascent but hyped open RAN space.

“Mavenir would have given Ericsson an instant seat at the open RAN table given Ericsson has been on the sidelines,” Townsend said. He also mentioned Radisys as a potentially interesting target for its various network services, including open RAN, but notes the company is a fully owned subsidiary of India’s Reliance Industries, the parent company of Reliance Jio. 

Japan’s Rakuten Group scooped up Altiostar, another U.S.-based open RAN equipment vendor, for more than $1 billion just a few months ago.  

Another more obvious but unlikely transaction would involve Ericsson merging with Nokia. Ericsson’s closest and longtime competitor has a market valuation of nearly five-and-a-half times the amount Ericsson just paid for Vonage, so it’s not a like-for-like comparison but interesting nonetheless. Indeed, the market valuations of Ericsson and Nokia are almost on par — Ericsson enjoys a current market cap of about $34.5 billion to Nokia’s nearly $33.4 billion.

The comparison is inevitable but probably irrelevant because operators want more legitimate competitors in the radio access network (RAN) market, not less, according to John Byrne, service director of telecom technology and software at GlobalData.

“Ericsson has the strongest portfolio position among its traditional competitors, but that could change in the future as Nokia continues to turn its business around under new leadership and Samsung Networks continues to build its momentum and leverages its strength in semiconductor and automotive to bring real world 5G applicability to the enterprise,” Townsend concluded.

Ericsson’s acquisition strategy of late, perhaps more than anything else, indicates where and how company executives intend to expand into new market segments. It’s all summed up in one word: enterprise. As such, the company likely has more moves under consideration. It’s not an easy market to break into, and it won’t come cheap.