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Cowen And Company: Ericsson Top Pick For Wireless Equipment – Cites Strength In LTE

|Includes:LM Ericsson Telephone Company (ERIC)

Cowen and Company recently named Ericsson as the Top Pick in 2013 for Wireless Equipment, with an Outperform rating. A core finding noted by the report is Ericsson's role in LTE. The authors note that the "push to LTE-A will be driven by the need for improved data capacity to address exploding mobile data usage." Highlighting this potential for increased demand, the authors cite comments from Erik Ekudden, Ericsson's Global Technologies Strategist to the effect that "LTE coverage [will] go from ~5% today to 50% in the next five years. Over this time expect data capacity demands to grow by factor of 14." According to Ekudden, there "three ways to get more capacity: 1) spectrum through new bands or novel use of existing bands, 2) technology innovation such as carrier aggregation, and 3) densification of the network such as using small cells." The authors expect LTE-A infrastructure deployments to begin in late summer with a focus on the early adopter markets of the U.S., Korea, and Japan."

Underscoring the need for increased capacity, the report references a panel discussion held at Cowen's 2nd annual Trend Spotting Technology Summit on January 3rd, with wireless industry luminaries Sandeep Chennakeshu, Sanjay Jha, Arogyaswami Paulraj, and Erik Ekudden on LTE-Advanced (LTE-A), the next evolution of wireless technology. The authors note that the "panel confirmed LTE-A's ability to address operator needs for carrier aggregation and higher data capacity at faster speeds." Moreover, according to the panel, "LTE-A driven complexities will offer opportunity for innovation across the wireless value chain, particularly in semiconductors and small cell management"… [and] "highlighted increasing complexities in wireless technology, which we believe offer opportunity for innovation across the value chain (particularly in semiconductors and small cell management."

To address this capacity need, the authors note,"[t]echnologies such as carrier aggregation (joining LTE bands), advancement in MIMO, and small cell interference management" must allow LTE-A to improve network efficiency, enhance end user experience, and support new revenue generating applications - especially video…[and complexity] (26 LTE bands, multiple carrier configurations) within the spectral landscape where LTE networks will be deployed will drive fragmentation and innovation in the wireless semiconductors (e.g. front end modules) and infrastructure markets. These developments, the authors conclude, have the potential to drive fragmentation and innovation in wireless semiconductors (e.g. front end modules) and wireless network topology (small cells). This is particularly significant for such early adopters, as "LTE-A not only brings increased data rates and support for new frequencies/bands, but also improved support for heterogeneous networks (HetNet), particularly small cells."

Stocks: ERIC