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

To: Diogeron who wrote (1418)	3/31/1998 1:56:00 AM
From: Caxton Rhodes	Read Replies (2) \| Respond to of 5390

TALKING POINT-Brazil's Ericsson faces rocky road Doesn't seem like ericy has a lock on Brazil. Caxton By James Craig BRASILIA, March 30 (Reuters) - Brazilian telecom equipment maker Ericsson Telecomunicacoes SA (ERI.SA) still faces a hard fight to hold onto its large market share despite receiving a badly needed boost on Monday, analysts said. Rattled this month by stiff competition, the Brazilian unit of Sweden's AB LM Ericsson (LMEb.ST) saw shares jump in early trade Monday after its parent signed a $360 million contract with Tess SA to supply a cellular network in Brazil. Although not a surprise, the contract eased fears Ericsson would be shut out of major equipment supply contracts linked to the ongoing privatization of Brazil's B Band cellular frequency, analysts said. ''This is the company's first big B Band contract and it looks like a good price,'' said Marcelo Mollica, a telecom analyst with local investment bank Banco Icatu. ''The outlook for Ericsson remains solid.'' With a more than $2 billion backlog of orders to fill, the company is widely expected to post strong revenue and earnings in 1998. The upbeat outlook was further enhanced by a resumption in the B Band privatization process and Monday's contract. But analysts said the local market leader will be hard-pressed to hold onto its 40 percent share of the fast-growing local market in the face of fierce competition from other major global suppliers. ''The problem is the long-term,'' said Sergio Missima of local bank Banco Fator. While the company's backlog of orders is huge and operations are solid, the stock will move almost entirely on the awarding of future supply contracts in the rapidly expanding market, he said. ''It will depend more on the news than on operating performance,'' Missima said. After losing major B Band contracts last year, Ericsson stock took another pounding earlier this month after it was apparently outbid for two major equipment contracts for state-owned telecoms in Rio de Janeiro and Sao Paulo states. NEC do Brasil, made up of Japan's NEC Corp (Nasdaq:NIPNY - news; 6701.T) and Brazil's Globopar, submitted the lowest price offers for two contracts tendered by A Band cellular firms to supply a total 1.6 million digital lines in Rio de Janeiro and Sao Paulo states. With major A Band contracts apparently falling into the hands of competitors and delays in the B Band tenders dragging on, Ericsson shares plunged more than 40 percent earlier this month. But company stock began bouncing back last week after a high court upheld Tess' winning bid for the B Band area No. 2 license for non-metropolitan Sao Paulo state. At the time, market sources said they expected Ericsson would win the area 2 equipment contract because Tess includes as operating partner Swedish group Telia. Indeed, the firm's preferred stock jumped nearly eight percent in two days after the ruling, which also allowed the government to resume the B Band licensing process after a seven-month hiatus. On Monday, Ericsson preferred was up 1.66 percent at 36.80 reais, later paring that gain to 36.60 reais in late afternoon trade. The price was well off its high hit in July of 78 reais, but moving swiftly upward from its 1998 low of 23 reais. Brokerages surveyed by Reuters said they were mostly maintaining buy and hold ratings on Ericsson Telecomunicacoes with year-end price targets of 50 reais to 55 reais.