From WSJ($) site: ERICY + ?
Lucent-Ascend Deal Pressures Ericsson To Make Acquisitions
By Jan Lindroth
STOCKHOLM (Dow Jones)--Ericsson (ERICY) will have to work harder to find acquisitions to compete in the data-communications field after Wednesday's merger of Lucent Technologies Inc. (LU) and Ascend Communications Inc. (ASND).
Lucent's strong position in telecommunications equipment and Ascend's strength in Internet communications hardware adds to the industry one more player with a strong position in both data and equipment telecommunications.
And since Ericsson makes equipment for the telecommunications infrastructure, its efforts in this sector will be more difficult.
"That deal is negative for Ericsson and other European telecom equipment makers such as Alcatel and Siemens," said Anita Farrell, telecommunications equipment analyst with Merril Lynch in London. "Lucent's relative competitiveness is improved through this deal."
Ericsson has said it is looking to buy smaller Internet technology companies, and it has so far made around three acquisitions, but observers feel Ericsson and other European companies are moving too slowly.
"Ericsson haven't been very aggressive but I expect they will make some more acquisitions this year," said Gunnar Andersson, telecom analyst with Handelsbanken in Stockholm.
Ericsson's largest Internet company takeover was the $285 million purchase of Advanced Computer Communications in April last year.
Future acquisitions will tend to be smaller than that, analysts believe.
As a comparison, Lucent has bought around 17 companies within the data-communications business and has been much more active than its European rivals.
"I am a bit disappointed with how the European telecommunications companies have acted so far, especially when you compare with Lucent," said a telecom analyst with a major investment bank in Stockholm.
No analysts seem to think Ericsson may be pondering a change in strategy. Instead, they expect a larger acquisition or merger along the lines of Lucent's buy of Ascend or Nortel's merger with Bay Networks.
On the Stockholm Stock Exchange, Ericsson plunged 6.7%, or SEK13.5, to SEK189 by 1552 GMT and was the worst-performing blue-chip on the market.
The sharp fall was caused by economic concerns in Brazil, where Ericsson has substantial interests, and fear that Ericsson may be falling behind in the data-communications race after the merger between Lucent and Ascend.
-By Jan Lindroth; +46-8-5451 3091 |
