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ERIC slumps, takes NOK/ALU with it after providing 2014-2018 growth outlook

  • At its Capital Markets Day, Ericsson (ERIC -6.5%) forecast its total addressable market will see a 2%-4% CAGR from 2014-2018, below the 3%-5% CAGR it forecast for 2013-2017 a year ago.
  • The network equipment market - Ericsson's equipment sales skew heavily towards mobile - is expected to see a 1%-3% CAGR, the telecom services market a 3%-5% CAGR, and the support solutions market a 7%-9% CAGR. Year-ago forecasts for 2013-2017 were respectively at 2%-4%, 4%-6%, and 7%-9%.
  • Ericsson aims to outpace its addressable market's growth via investments in "targeted areas" such as cloud services, IP networking, TV/media equipment, and carrier OSS/BSS software. The company forecasts a 10% CAGR for targeted areas. On a trailing 12 month basis, revenue from targeted areas totals SEK45B ($5.2B), up from SEK35B a year ago.
  • By 2020, Ericsson wants to get ~20%-25% of its revenue from non-carrier customers, up from ~10% in 2014. It also wants to get over 75% of its revenue from services and software, up from 66% in 2014. A restructuring that was announced last year and aims for SEK9B ($1.03B) in annual savings by 2017 is said to be on track.
  • Rivals Nokia (NOK -2.7%) and Alcatel-Lucent (ALU -2.6%), set to become one company in 1H16, are also off. Ericsson's forecasts come a day after the company announced a major partnership with switch/router giant Cisco, a deal viewed in part as an attempt to counter Nokia/Alcatel. Cisco rival Juniper, long the subject of Ericsson M&A speculation, sold off in response.
  • Ericsson press release, presentation slides

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