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

To: Sawtooth who wrote (1549)	4/30/1998 1:51:00 AM
From: DWB	Read Replies (1) \| Respond to of 5390

Here are a number of good perspectives and clairifications on the latest quarterly results... STOCKHOLM, April 29 (Reuters) - Sweden's Ericsson (LMEb.ST) released first quarter earnings on Wednesday that fell short of market expectations and further unnerved investors by taking extra provisions for what it called increased risks. Shares in the mobile telephone and telecoms system maker dropped sharply after the group said its pre-tax profit rose 31 percent to 2.64 billion crowns, below the average market forecast of 3.24 billion crowns. The share price traded 24.50 crowns lower at 385 immediately after the result compared to 7.50 crowns down ahead of the numbers. By market close in Stockholm the share had recovered to 398 crowns, down 11.50. Ericsson said currency fluctuations boosted first quarter income by 400 million crowns. The company said the result was in line with its own expectations. ''Further provisions have been made in anticipation of increased risks related to changes in markets, technologies and customer financing,'' Ericsson said in its results statement. Later the company explained it had increased its provisions to correspond with the growth in sales. ''Increases in reserves are made when the group increases volumes,'' deputy chief executive Carl Wilhelm Ros said. The company's chief executive, Sven-Christer Nilsson, also said analysts had not taken into account large seasonal factors when explaining why the result was below expectations. Ericsson stressed the year had begun favourably, saying orders and sales continued to develop well in April. Most regions showed strong growth in the first quarter of 1998, Ericsson said. During the period China surpassed the United States as the company's largest market, the company said, adding that this was likely to continue. Cash flow before financial operations was negative in the first quarter, as it had been in the first quarter of 1997, but Ericsson said it expected it to be positive for the full year. Ericsson blamed ''increased undertakings for customer financing and Ericsson's seasonal variation in volume,'' for the negative cash flow, among other factors. Salomon Smith Barney analyst Douglas Smith said the company had clarified later why sales costs rose to 22.46 billion crowns in the first quarter from 17.98 billion crowns. ''I think the company explained clearly that there were new investments in information technology and in building up the brand name for mobile telephones, which I think is important.'' ''Sales volumes are usually lower due to seasonal factors in the first quarter,'' Smith said, adding he did not plan to change his buy recommendation on the share. Swedbank telecoms analyst Jan Ihrfelt said the company had pointed to some non-recurring factors depressing earnings. ''They said there were some one-time effects in the first quarter due to the large marketing campaign called 'Make Yourself Heard' and investments in data systems which are heavy right now,'' he said. But he added comments about price pressure were a concern. Ericsson said price pressure on mobile handsets had not been as severe as expected. But deputy chief executive Ros told a telephone conference it would not be surprising if price pressure picked up. Ericsson said its unprofitable Infocom Systems business area had continued a programme to improve profitability and the goal was that it would show a positive result in 1998. The company posted sales of 11.05 billion crowns in its Mobile Phones and Terminals division compared to 7.62 billion crowns in the first quarter of 1997. In its largest division, Mobile Systems, sales rose to 16 billion crowns from 12.9 billion. Sales in Infocom Systems rose to 10.62 billion crowns from 9.28 billion.