Ericsson jumps on strong Q2; Alcatel-Lucent, Nokia also rally

After declining 13% Y/Y in Q1, Ericsson's (ERIC +8.3%) Networks (mobile infrastructure) sales rose 3% in Q2 to SEK29B ($4.26B), thereby fueling a revenue beat.

That, in turn, is sparking a rally in rivals Alcatel-Lucent (ALU +5.3%) and Nokia (NOK +2.7%). Nokia reports on July 24, and Alcatel on July 31.

Ericsson's remarks suggest mobile data demand drove the turnaround: Much of its sales growth came from radio access (base station) demand; sales of IP edge and IMS products were also strong; and capacity upgrades in "advanced LTE markets" (such as the U.S.) were solid due to "operators’ focus on network performance as a key differentiator." 11 new contracts were signed for Ericsson's SSR 8000 routers.

"The usage of networks on 4G is high so operators need greater density and improvement in capacity," says CEO Hans Vestberg. He adds orders are finally being fulfilled for Chinese 4G contracts.

Global Services revenue remains soft, declining 7% to SEK23.1B ($3.38B) after falling 5% in Q1. Support Solutions +21% to SEK2.8B ($410M) vs. +13% in Q1.

Gross margin was 36.4%, -10 bps Q/Q but +400 bps Y/Y. Op. margin jumped 280 bps Y/Y to 7.3%. "To us, industry fundamentals will strengthen as mobile broadband networks mature, allowing Ericsson and its peers to present higher profitability," predicts ABG's Sundal Collier.

Q2 results, PR (.pdf)

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Comments (8)
  • Andreas Hopf
    , contributor
    Comments (20104) | Send Message
    This shows, again, that Hans Vestberg is not asleep at the wheel. Nevertheless, the three largest telecommunication equipment vendors are based in Europe and I still believe that is one too many.


    With Michel Combe's "Shift" plan working well since he became CEO of Alcatel-Lucent, I have the suspicion that his intention could be to ready the company for a merger or take-over.


    The TEV market will get interesting after having been pushed back into "boring" territory while MOMO-stocks and hype stocks were and still seem de rigueur.
    18 Jul 2014, 11:06 AM Reply Like
  • mm81679
    , contributor
    Comments (101) | Send Message
    If merger or take-over Andreas, what do you think ALU stock would be worth ?
    18 Jul 2014, 11:56 AM Reply Like
  • Andreas Hopf
    , contributor
    Comments (20104) | Send Message
    If I could figure that out, I would not be here on SA.


    Time is not quite ripe yet, while we have to see how Huawei's and Samsung's new or expanded European research centres and their new round of price-cuts fare. I would think only seriously specialised people in the TEV business can estimate merger or break-up value, if at all.
    18 Jul 2014, 12:28 PM Reply Like
  • DWD Investing
    , contributor
    Comments (13464) | Send Message
    ALU takeover what? They can't even pay their own bills. You mean ALU shopping itself, after getting financials in order, for a buyer?
    18 Jul 2014, 03:16 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (20104) | Send Message
    Alcatel-Lucent, thanks to Jean Raby's trickster bankster past, can pay their bills. Who will eventually take over whom I don't know. It's too early to tell. But Hans Vestberg made a prudent move splitting Ericsson's TE division in half earlier this year.


    Once the Asian R&D and pricing pressure, also on the maintenance side of contracts, has firmed up sufficiently, then it'll get interesting.
    18 Jul 2014, 05:31 PM Reply Like
  • sjflegends
    , contributor
    Comments (75) | Send Message
    Michel Combes would command a very very high price for possible takeover. His legacy doesn't include being taken over by another company. His main intent is to shed loss producing areas and strengthen profit and innovation.


    Michel Combes stated, "we can go it alone" not just for the sake of it. ALU will remain a standalone company as long as he's at the helm.


    But there may be deals involving wireless or the submarine network division. But that's to the extent of him achieving his 2015 goals for the shift.
    19 Jul 2014, 02:03 AM Reply Like
  • sjflegends
    , contributor
    Comments (75) | Send Message
    Yep, Jean Raby was by DESIGN, not coincidence. Michel Combes and jean Raby are a powerhouse. One for the tech side and the other for the financials.


    Can't get much better than that...


    19 Jul 2014, 02:08 AM Reply Like
  • User 9571521
    , contributor
    Comment (1) | Send Message
    19 Jul 2014, 11:52 AM Reply Like
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