Smart grid networking company Ambient Corp. has filed for bankruptcy protection after being unable to grow its business beyond its key customer, utility Duke Energy. Now it’s hoping a $7.5 million stalking-horse bid from Ericsson will keep its grid node business and broader technology portfolio alive.

Ambient filed for Chapter 11 bankruptcy protection in Delaware late last month, putting to rest a ten-month search for a buyer or other “strategic alternatives” to rescue the company’s fortunes. For the past several years, the Newton, Mass.-based company has seen profits turn to increasing losses as it has failed to find new customers for its grid communications nodes.

Ambient’s bankruptcy petition listed $1.75 million in assets and $3.54 million in debt (PDF). The once-publicly-traded company was delisted from the Nasdaq stock exchange last month, and suspended its reporting obligations to the U.S. Securities and Exchange Commission this week. Hedge fund Vicis Capital Master Fund holds 57.8 percent of Ambient’s shares and loaned it $5 million in its unsuccessful attempt to find a buyer last year.

But Ambient’s significant patent portfolio and research and development team may find a new home, under its stalking-horse purchase agreement with telecommunications giant Ericsson. Under this agreement, Ericsson has set out a $7.5 million offer to buy the company if no other competing bids emerge, said Wayne Weitz, managing director of Gavin/Solmonese LLC, the firm hired as financial advisor for its bankruptcy proceeding, in a Friday interview.

That sets a floor price for potential competing bids, which are due by Sept. 22, he said. Ericsson has also agreed to hire Ambient’s current employees and maintain all of them at their current salaries as part of its agreement, though the company's CEO and COO may see their compensation reduced, he said.

“Ambient has some wonderful intellectual property and a fantastic R&D team, but it doesn't have the depth of balance sheet or cash to weather any kind of downturn or transition, or to be able to take advantage of opportunities with customers,” he said. “With a stronger balance sheet behind it, it will have a better chance to penetrate the market.”

Ambient was founded in 2002 to provide broadband-over-powerline (BPL) technology to utilities, only to switch its focus when it became clear that utilities weren’t going to be able to compete with telcos and cable providers by using their power lines as broadband pipes. (Current Group and BPL Global, two other former broadband-over-powerline companies, have followed similar paths, only to be acquired in the past two years.)

Ambient’s answer was to turn to its grid nodes -- modular, multi-communications capable devices that link smart meters, grid sensors and other networked devices on the grid. Its first big customer was Duke, which has deployed about 100,000 of Ambient’s nodes for its smart meter projects in the Cincinnati, Ohio region and a much smaller deployment in Raleigh, North Carolina. But as the Duke contracts wound down, Ambient was unable to secure more customers, and its revenues plummeted.

One could imagine that Ericsson might see Ambient’s nodes as a useful tool for its existing smart grid work. The Swedish company provides communications for many smart grid projects around the world, including a project linking some 600,000 smart meters in Sweden for utility E.ON, a 630,000-smart meter project with Landis+Gyr in Estonia, an industrial gas metering project with Italian utility Italgas, and work with Australian utility SP AusNet to network meters via 3G cellular.

As for Duke, it still has millions more customers it has yet to smart-meter in its service territories in the Carolinas and Indiana -- but it’s far from clear that the utility will continue to work with Ambient on these projects. In April, Cisco smart grid partner Itron announced that it had a “significant agreement” with Duke that could see Cisco and Itron’s technology used for Duke's broader plans for grid networks that combine smart meters, distribution automation, volt/VAR optimization and distributed energy resource management.

Ambient does have other technologies on offer, including power quality monitoring technology it has piloted in the U.K. In June, it launched a project with Consolidated Edison to link legacy commercial and industrial meters to the New York utility's new smart grid networks.