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

To: Tweaker who wrote (1552)	4/30/1998 1:56:00 PM
From: Chuck Martin	Read Replies (1) \| Respond to of 5390

From today's Wall Street Journal... Heard in Europe Good Prospects Seen For Sweden's Ericsson By ALMAR LATOUR Staff Reporter of THE WALL STREET JOURNAL Investors seem to prefer Finnish telecom giant Nokia Corp. to archrival Telefon AB L.M. Ericsson, but the Swedish group's long-term profit outlook may yet prompt some people to reconnect. So far this year, Nokia's shares have outperformed that of Ericsson, which releases first-quarter results Wednesday. Ericsson's Class B shares have risen about 30% this year, compared with 70% for Nokia. Why the discrepancy? Some analysts say they fear that Ericsson may have lost market share to Nokia in the global system for mobile communications, or GSM, business. They also point out that Nokia has come out with a promising new family of phone handsets, which may put more pricing pressure on rivals. Moreover, analysts are waiting to see if there is any sign of recovery in Ericsson's restructured infocom division, which was still unprofitable in the fourth quarter. Ericsson tried to address the problems of this troubled division last year by laying off 10,000 workers. And on Tuesday it said it would retrench about 270 employees at the division's Stockholm office. Nokia raised the stakes for Ericsson last Friday, when the Finnish group said first-quarter pretax profit rose 59% from a year earlier to 2.3 billion markkaa ($423.9 million). The news damped Ericsson shares recently, amid worries that the company could have lost market share to Nokia. In Stockholm trading Tuesday, Ericsson's Class B shares closed at 423 kronor ($54.82), up 21 kronor. In Helsinki, Nokia Class A shares ended at 356.40 markkaa, up 16.40 markkaa; the Class K shares settled at 353 markkaa, up 13 markkaa. "Ericsson shares are probably lagging Nokia because of market worries about price pressure in the handset business and infocom," said telecom analyst Paul Hansson of Myrberg Securities in Stockholm, who still expects Ericsson to earn 3.25 billion kronor for the first quarter. "Although infocom may show black figures later this year, they will likely still be red in the first quarter." Regardless of the difference in the performance of the two companies' shares, analysts still expect Ericsson to continue to achieve solid growth this quarter and well beyond. During the first quarter, the Swedish company was buoyed by strong orders at its mobile-systems division, the key driver behind the group's glowing performance in the past. Earlier this year, Sven-Christer Nilsson, Ericsson's new president and chief executive officer, noted that Europe's cellular markets are doing well and that the company got its "fair share" of sales. In the U.S., where subscriber growth has been somewhat disappointing for the industry at large, Ericsson hasn't been hit by problems that Motorola Corp. is facing, according to Mr. Nilsson, who started his new job on March 30. Last month, Ericsson also raised its forecast for the world-wide cellular-subscriber population to 605 million by the year 2001, from 590 million. It also predicted annual growth of 27% in the number of global subscribers over the next five years, compared with analysts' forecast of 20% to 25%. Some observers say there is no reason to worry about Ericsson and dismiss concerns about infocom as exaggerated. "I don't like to focus on just one issue," said Gunnar Andersson at Svenska Handelsbanken in Stockholm. "The market is nervous after such a long time of good performance. But Ericsson's first-quarter results should be strong compared to the first quarter last year."