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Technology Stocks : Ericsson overlook? -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (4672)	4/21/2001 10:16:37 AM
From: Eric L	Respond to of 5390

re: "Buck" on Ericsson >> Ericsson Reports Q1- GPRS Booming Simon Buckingham Mobile Lifestreams 20 April 2001 Ericsson's quarter 1 2001 Orders and Sales fell by just 5%- not a bad performance given the substantially changed business environment of the past 12 months. However operating income collapsed by 82% and income before taxes by 90%. This was a brutal collapse in profitability and margins. Ericsson did made 5 billion or more in exceptional gains from its investment in the pioneering large scale router company Juniper Networks in the period- there are not many venture capital investments that pay off that well. Ericsson reported that: "In 3G, we have announced 26 WCDMA supply agreements so far, a number of which are now firm commercial contracts. We have been shipping 3G products since the fourth quarter of last year. Regarding GPRS, 68 network upgrades have been ordered from us, with 55 implemented and several already taken into commercial service." This is an incredible performance in GPRS, coupled with a continued but reduced market leadership in 3G. However, given Nokia’s recent zealousness in issuing press releases relating to 3G, it is not surprising this lead has been cut. Many tier 1 network operators are working with Ericsson for 3G such as Vodafone UK, Vodafone D2, TIM etc. Ericsson retains its overall infrastructure superiority and it is unlikely that this can be reversed, it is so entrenched around the world. Furthermore, "TDMA operators in the Americas plan to use GSM/GPRS as the upgrade-path to 3G. Of the 5 operators that have already announced their plans, we have been selected as a supplier by all of them and as the sole supplier in most cases." Ericsson is strong in TDMA infrastructure and GSM infrastructure and is best placed to benefit from this continuing trend. Ericsson must hope that these 5 become a lot more networks as larger TDMA markets such as Brazil and Mexico join some of the smaller ones in adopting GSM roadmaps. This would contribute to further 2001 sales momentum. SECOND QUARTER PROSPECTS Ericsson says: "For the second quarter 2001, we see a lower growth rate in systems sales and lower phone sales compared with the second quarter of last year". Ericsson should have a substantial advantage in terms of supporting GPRS, WAP 1.2 and Bluetooth- it is 2 to 3 quarters ahead of Nokia in delivering these technologies commercially in its handsets. The R520 supports all of these technologies and has commenced shipments in some European markets, albeit with early software glitches. This is a sizeable advantage that Ericsson needs to exploit. Its first Multimedia Messaging compliant phone the T68 will be shipping in the same timeframe as Nokia’s first GPRS phones. Ericsson is starting to ship its T20e and T29 Enhanced Messaging phones in quarter 2- these consumer devices may prove to be popular competing with the Nokia 3330. SUMMARY Certainly it has been a very tough quarter for Ericsson’s profitability, principally in terminals. The new products it has in the pipeline and the measures taken to restructure this business should contribute to improved profitability within a year- certainly another collapse of this scale in profitability is unlikely, although quarter 2 sales can be expected to fall more significantly than they did in the first quarter. If Ericsson can execute well with the contracts and devices it has announced, better financial performance should ensue. << - Eric -