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

To: Jim Oravetz who wrote (4929)	2/4/2002 9:22:27 AM
From: elmatador	Respond to of 5390

Message 17005741

To: Jim Oravetz who wrote (4929)	2/5/2002 12:50:34 PM
From: Jim Oravetz	Read Replies (1) \| Respond to of 5390

Ericsson Sees Loss From 3G Networks-Sources Tuesday February 5 10:06 AM ET dailynews.yahoo.com STOCKHOLM (Reuters) - High development costs mean Ericsson will make a loss from its new 3G mobile Internet networks this year, sources at the Swedish telecoms equipment company said on Tuesday. ``One should not expect that 3G will make a profit this year when invoices start coming in -- that would be naive. The main reason is very high development costs,'' a senior Ericsson source told Reuters. ``I do not know when we will reach break even in 3G, but it will take a while,'' the source said. Some analysts expect Ericsson's 3G network business to lose between 10 and 15 billion Swedish crowns ($940 million-$1.4 billion) this year. Ericsson's long-term prospects are closely linked to the success of third-generation (3G) technology, offering multimedia functions on handsets and always-on connections to the Internet. Indeed, telecoms equipment makers and mobile operators are looking to the new technology to fuel the next wave of growth in their sector. The mobile operators have spent hugely to secure 3G licenses in the main European markets. Any delay in seeing 3G bring in profits will make it even harder for Ericsson -- which suffered its first full-year loss in 2001 -- to reach its ambitious target of a five percent operating margin this year. Ericsson, the world's biggest producer of mobile networks and third biggest handset supplier, is a supplier in 60 percent of all 3G network construction deals so far, which gives it a 40 percent global market share in terms of contract value. Ericsson has merged its handset division with Japan's Sony Corp in an effort to restore that unit to profitability. It expects sales of 3G mobile networks to account for some 10 percent of its sales this year, most of which would be invoiced in the second half of the year. It is already shipping to 30 operators. Most of the revenues from its mobile systems business will come from second-generation networks, like the popular GSM, the current industry standard in Europe. Ericsson spent 43.1 billion crowns on research and development last year, mostly on 3G telephony. Another Ericsson source said that as with second-generation telephony, profitability of 3G sales depended on volumes. Once sales picked up, the development costs would be more easily offset and margins would rise. Loss-making Ericsson, struggling to return to profitability as operators put investment on hold due to the global economic slowdown, has kept a one percent operating margin for its key systems division for the last three quarters. Ericsson would not comment on the operating profitability of 3G networks, saying it was only reporting the margin for the whole systems business area.