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Technology Stocks : Ericsson overlook?
ERIC 9.295-0.3%3:59 PM EST
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To: lazarre who wrote (1839)7/27/1998 12:02:00 PM
From: tero kuittinen  Read Replies (2) of 5390
 

Hi lazarre,

I'd see this as a buying opportunity. Ericsson had a white hot 1997: its new phones clocked in 80-100% sales growth. It is now suffering from not speeding up its product cycle and introducing truly new technology this year, but that should be transitory. Nokia was in a similar position last year when it was stuck with aging product portfolio - it has bounced right back. Ericsson should bring out some exciting phones in -99 and you should always try to buy before new product introductions (like Nokia last January).
Of course, personally I prefer Nokia and think they have somewhat superior technology... but it's hard to recommend that stock after the recent run-up. This 20% drop in Ericy is quite nice buying opportunity - I don't understand why the analysts are unable to separate true technological weakness (Motorola's 0% growth in handsets) from the low point in product cycle (Ericsson's 19% growth in handsets). It *is* disturbing that Ericsson was so complacent that they chose not to bring out more new stuff during 1998 - but I would assume this was something they learn from: I haven't seen this company repeat the same mistake twice.
You might want to think about timing - Ericsson's dearth of new phones won't get better anytime soon. There might be some tough times ahead after the third quarter. I'd probably buy some now and some after 3Q if I hadn't sunk every penny I have in Noka.

Tero
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