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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: foundation who wrote (31999)	2/3/2003 6:23:34 PM
From: foundation	Respond to of 197214

Ericsson Stumbles Into 2003 Unstrung 02.03.03 Wireless infrastructure market leader LM Ericsson (Nasdaq: ERICY - message board) today reported a fourth-quarter and full-year 2002 loss. Worse still, it also gave indications that 2003 could be an annus horribilis for the Swedish vendor (see Ericsson Reports Q4). First, the bad news: The vendor has limited expectations for sales of 3G network equipment in 2003. The company also places emphasis on the CDMA equipment sector, where it is currently a minnow. Next, the not-quite-so-bad news: Ericsson's fourth quarter loss before taxes was 2.2 billion Swedish kronor (US$256 million), an improvement on the SKr 5.1 billion loss in the same quarter of 2001, and on the smaller loss of SKr 3.9 billion in 2002's third quarter. The full-year 2002 loss was SKr 14.5 billion (US$1.69 billion), again not as depressing as 2001's SKr 21.1 billion – so at least the losses are not deepening. Shares of Ericsson trading on Nasdaq fell .82 (-10.09%) to $7.31 today. In the key mobile network systems division, sales and orders were all down compared with the previous year (see table below). However, the fourth quarter systems sales, at SKr 33.2 billion, were an improvement on the third quarter's SKr 30.6 billion. Surprisingly, Ericsson reported an operating loss of SKr 300 million (US$35 million) on this line of business, due primarily to SKr 700 million (US$81.7 million) of customer financing charges. Analysts had been expecting that figure to be in the black because of reduced costs and sequentially increased sales. Nomura International communications equipment analyst Richard Windsor says the losses were higher than expected, and that the broad mix of technologies Ericsson covers – GSM, CDMA, TDMA, and PDC (Japan) – leave it with high fixed costs that are hurting margins. "It is worrying that higher sales in the quarter led to lower margins," states Windsor in a research note. He believes additional pressure in the form of price cuts in the U.S. came from Ericsson's archrival Nokia Corp. (NYSE: NOK - message board), which reported its latest financials last week (see Nokia Posts Solid 4Q). The U.S. is Ericsson's leading market for mobile systems (in terms of sales and orders), followed by China and Italy. Windsor concludes that further cost-cutting and the stabilization of orders and sales will see Ericsson reach breakeven during 2003. Ericsson, however, is wary of beating its drum too vigorously. The company still regards the entire mobile market as largely unpredictable, resulting in guidance for the first quarter of 2003 (sales down by 30 percent on the previous quarter) that the wireless equipment analysts at Lehman Brothers describe tactfully as "cautious." Capital expenditure cuts and postponed rollout plans are major contributors to the uncertainty in the industry (see Orange Shackled by FT and O2 Passes the Buck). As a result of such uncertainty, Ericsson expects sales of next-generation wideband CDMA (WCDMA, or 3G) equipment to account for just 10 percent to 15 percent of all mobile system sales in 2003, an estimation the analysts from Lehman describe circumspectly as "modest." In 2002, WCDMA equipment accounted for 9 percent (SKr 11.88 billion, or US$1.39 billion) of total mobile system sales. While Ericsson believes it has won 40 percent of all WCDMA sales, it knows it is lagging badly in the CDMA and CDMA2000 markets. A spokeswoman says the Swedes have just 5 percent of the market at present, which puts Ericsson way behind the likes of Lucent Technologies Inc. (NYSE: LU - message board), Motorola Inc. (NYSE: MOT - message board), and Nortel Networks Corp. (NYSE/Toronto: NT - message board), according to the estimates in November's Wireless Oracle, "The 'X' Factor: Competitive Positioning in the CDMA Infrastructure Market." The spokeswoman says Ericsson aims to be a bigger player in CDMA because of the current size of the market in China. The potential for further CDMA2000 equipment deals, dependent on the conditions of the 3G licenses that could be awarded at any time, is also enormous. Contracts worth billions of dollars hang on decisions still to be made by the Chinese government. — Ray Le Maistre, European Editor, Unstrung unstrung.com ========== ERICY is hoping for 1.5B to 2.3B in 2003 wCDMA infrastructure CAPEX - spread amongst the dozens and dozens of 3GSM carriers world wide? For all the planned "commercial" launches? 3B to 3.8B TOTAL in wCDMA infrastructure? One cell station each? LOL! What will that fall to if Hutchison 3 fails to launch by April, or fails to attract subs? What will that fall to if FOMA continues to average 5500 subs per month and misses its already slashed March target?