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

To: P2V who wrote (2177)	10/22/1998 11:25:00 PM
From: P2V	Read Replies (2) \| Respond to of 5390

Quotes from osaketieto ----------- Two major wireless equipment companies reported today their earnings: Lucent beat slightly (+4%) its upward-guided estimate, Ericsson was slightly below (-2%). Compared to year-ago period, Lucent EPS grew by 46%, Ericsson's by about 5%. The reporting of Ericsson was less informative than previously (no new orders, more back-tracking of previous quarters). Given the economic turbulence in Asia and Latin America, which have been very strong areas, the company fared well during the quarter. China was very strong, which indicates that Nokia's earnings on Friday should be very strong. Europe was still strong: ---------------------------------------------------------------------- Regarding business areas, Mobile Systems saved the quarter. As sales in Mobile Phones decreased by 2%, CEO Nilsson's statement last week, that "we are not loosing market share", sound more a dream-like wish. Nokia NMP will report numbers, which will prove that Ericsson was bs'ing. That is the problem with the new Ericsson: lot of fine words too soon. Even though we believe that the company is on track to get it's Infocom unit in order next year, we would prefer more honest (even bad news covered in timely manner) and transparent IR. -------------------------------------------------------------------- In addition to recovery of Infocom (ex- topman Anders Igel left), the new handset platform within few months will improve ERICY's market position. CEO Nilsson said today that the product cycle of handset is currently only 12 months. This could mean a shift from Nokia dominance toward Ericsson. The two will continue to dominate the digital arena; we doubt that Motorola could do any major harm for them. All three could benefit from the divorce of Lucent and Philips. For Lucent it is a good move to let the loss-making joint venture go. Our recommendation for Lucent (LU) is 3/M (hold, moderate risk). It is a quality company and good blue-chip; valuation of the stock is relatively high. We reiterate our 1/H (strong buy, high risk) recommendation for Ericsson. If things would start really sucking, Ericsson downside is smaller than Nokia's. On the upside, both decreasing share (of revenue) of sales and R&D costs as well as the new handset platform, should all contribute to margin expansion, and probably to P/E multiple expansion as well. Nokia is still our short-term cellular favorite, but it must deliver on the upside to maintain its position.