Ericsson: 3.5% Yield Supported By Smartphone Growth
- The impressive growth on the number of smartphones has led to huge investments by telecom operators in mobile infrastructures.
- Ericsson is the world's leader in the 2G/3G/4G mobile network infrastructure market, with about 40% market share.
- It offers a sustainable dividend yield of 3.5%, which has good growth prospects supported by telecom operators' plans to modernize and expand their mobile infrastructures.
Ericsson Blows Past Estimates, Still Announces LayoffsEric Savitz • Jan. 21, 2009
Ericsson Net Drops 36% on Falling Margins; CFO ResignsEli Hoffmann • Oct. 25, 2007
Don't Write Off Ericsson, Especially at This ValuationJohn Christy • Sep. 21, 2007
Ericsson's CEO Suggests More Multimedia AcquisitionsSteven Towns • Mar. 29, 2007
Yesterday, 12:32 PM
- Though Ericsson (ERIC -3%) beat Q3 estimates, the mobile infrastructure giant stated North American business activity "slowed down during the quarter as operators currently focus on cash flow optimization." It added North American spending patterns make it tough to judge near-term demand.
- Ericsson's North American sales fell 3% Y/Y to $1.93B, partly offsetting strong growth in China, India (+56%), the Middle East (+38%), and other emerging markets. Top-line figures were boosted some by M&A.
- AT&T and Verizon have been taking cautious approaches to capex, and Sprint (though investing heavily in 4G following the SoftBank deal) has been looking to cut costs under new CEO Marcelo Claure. The U.S. and Japan have been ahead of many other developed markets in ramping 4G coverage.
- Juniper (JNPR -6.3%) offered light Q4 guidance two weeks after delivering a Q3 warning, and reported its service provider sales were down 6% Y/Y due to soft demand from Asia-Pac, EMEA, and (especially) U.S. carriers.
- When the world's #2 carrier router vendor was asked on the CC (transcript) about 2015 sales, CEO Shaygan Keradpir admitted Juniper has poor near-term visibility, and that a rebound could take time. "Because we think these cycles typically take 2 to 4 quarters ... our planning assumption is that growth will return in the second half of 2015."
- Nokia and Infinera recently offered more positive numbers/commentary. Bulls have argued strong data/video traffic growth will lift capex. Bears have argued soft (if not negative) carrier revenue growth will continue pressuring spending.
- Decliners: ALU -1.6%. JDSU -2%. INFN -3.1%. CIEN -2.5%. CALX -2.5%. FNSR -1.8%. ADTN -1.5%. The Nasdaq is up 0.4%.
Yesterday, 6:05 AM
Thu, Oct. 23, 5:30 PM
Thu, Oct. 23, 9:38 AM
- Jefferies has upgraded Alcatel-Lucent (NYSE:ALU) to Hold ahead of the company's Oct. 30 Q3 report. The firm cites a more favorable valuation following Alcatel's recent selloff.
- Aside from the upgrade, Alcatel could be getting a lift from Nokia's strong Q3 numbers. Fellow mobile infrastructure vendor Ericsson (NASDAQ:ERIC) is also rallying; its Q3 report is due tomorrow.
Thu, Oct. 9, 11:34 AM
- Alcatel-Lucent (ALU -9%) is headlining a group of telecom equipment vendors selling off this morning, as worries about weak telecom capex remain following plenty of bad earnings news. Alcatel's declines come in spite of an upgrade to Buy from Craig-Hallum.
- Morgan Stanley has cut its Q3 and Q4 Juniper (JNPR -1%) estimates due to expectations of weak AT&T capex. Jefferies reported in June AT&T had slashed its wireline capex, and Ciena (CIEN -3.7%) stated in September AT&T was responsible for its soft Oct. quarter guidance.
- Ma Bell has slashed wireline capex ahead of the full launch of its huge Domain 2.0 SDN/NFV initiative. However, like Ciena, Morgan Stanley asserts Domain 2.0 remains a long-term positive for spending. MKM has argued it's a positive for Ciena and several other firms, but a negative for Cisco given a loss of vendor lock-in.
- Yesterday, BofA/Merrill launched coverage on Alcatel with a Neutral rating, and expressed concerns about the company's ability to hit 2015 revenue estimates amid a weak demand environment. Two weeks ago, Dell'Oro forecast global telecom capex will fall 2% in 2015 due to slowing mobile revenue growth.
- Bulls argue a lot of bad news is priced in, and the strong Web/mobile traffic growth will provide a lift to capex.
- Other decliners: ERIC -2.6%. ZHNE -3.2%. PKT -3%.
Wed, Oct. 1, 2:38 PM
- Ericsson (ERIC -1%) has bought Ambient, a smart grid networking tech provider that recently filed for Chap. 11. Ericsson had previously submitted a $7.5M stalking-horse bid.
- Ambient's platform features hardware and software that allows utilities to run multiple smart grids in parallel, and to do so using a variety of telecom technologies (inc. cellular and Wi-Fi, which Ericsson has plenty of experience with).
- Ambient also has a sizable smart grid patent portfolio, and offers various consulting/installation services. Ericsson client Verizon is a mobile network partner. Silver Spring (SSNI -4.7%) is among Ambient's rivals.
Tue, Sep. 23, 5:20 AM
- Mexico has received its first bid from a consortium led by Alcatel-Lucent (NYSE:ALU) and Ericsson (NASDAQ:ERIC) to build its proposed $10B state-owned mobile network - an effort that will break the hold of Carlos Slim's America Movil (NYSE:AMX) on the industry.
- If the consortium's bid wins, those companies could be key suppliers of mobile antennae and other gear as well as manage the network.
- Mexico expects to pick a winner in mid-2015.
Mon, Sep. 22, 2:18 PM
- Ericsson (ERIC -0.6%) has bought a majority stake in Apcera, provider of an enterprise cloud app development platform (PaaS) that tries to differentiate itself through a focus on security/policy controls. Terms are undisclosed.
- Apcera, which faces competition from Microsoft, Amazon, Salesforce, Google, and several other prominent rivals, will continue to be run independently. Its PaaS platform supports public, private, and hybrid cloud deployments.
- Ericsson predicts integrating Apcera's offerings with its existing cloud management software/services will allow it to provide carriers and enterprises with "complete cloud automation to run all workloads and use cases, while providing complete control for infrastructure."
- The mobile infrastructure giant hasn't been shy about using M&A to increase its software and services exposure.
Thu, Sep. 18, 1:56 PM
- Ericsson (ERIC +4.5%) is joining Broadcom and Texas Instruments in exiting an R&D-intensive mobile baseband modem market dominated by Qualcomm (QCOM +0.6%) and MediaTek. The mobile infrastructure giant says it will discontinue baseband development, and direct some of the resources to base station R&D.
- ~500 workers will be added to Ericsson's mobile radio network teams. With the baseband unit currently having 1,582 workers, that suggests over 1K jobs could be cut. For reference, Ericsson estimates its 2014 baseband R&D spend will be SEK2.6B ($366M).
- Shares are up strongly on the news. Ericsson's baseband ops (focused on 4G modems) stem from the winding down of its ST-Ericsson JV last year.
- In addition to MediaTek, Qualcomm still faces baseband competition from Intel, Nvidia, Spreadtrum, Marvell, and (indirectly) Samsung. While MediaTek and Spreadtrum are profitable, Intel's mobile unit (also covers app processors) has been posting big losses, and (though the companies don't break out the numbers) analysts have estimated Nvidia and Marvell's baseband ops are producing little or no profit.
Fri, Jul. 18, 10:55 AM
- 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)
Fri, Jul. 18, 9:15 AM
Fri, Jul. 18, 5:45 AM| Comment!
Thu, Jul. 17, 5:30 PM
Tue, Jul. 1, 5:03 PM
- Following a Bloomberg column mentioning Ericsson (ERIC +0.2%) is discussing managed services deals with AT&T and Verizon, the company states it's not in "specific discussions" with either carrier about managing their networks.
- Ericsson adds it frequently discusses its various services offerings with clients in general. Verizon, meanwhile, says it doesn't "outsource our network management."
Tue, Jul. 1, 12:36 PM
- Ericsson (ERIC +0.3%) says it's "in discussions" with AT&T and Verizon about deals to manage their mobile infrastructures. Given Ericsson's 7-year managed services deal with Sprint (a smaller carrier) is worth $5B, the size of any contract with AT&T or Verizon could be massive.
- Ericsson, hungry to cut its hardware dependence by growing higher-margin software and services sales, forecast last November the telecom services market would show a 5%-7% CAGR through 2016. That's better than the 3%-5% CAGR expected for carrier networking equipment.
- Managed services chief Claude Geha argues a broader trend is afoot among carriers to outsource network management, and points to a new 7-year deal with Greek carrier OTE as proof. Geha suggests the deal creates opportunities for Ericsson do more work for Deutsche Telekom, which owns 40% of OTE.
- Previous: E-mail suggests Ericsson set to win contract from Neustar
- Update: Ericsson says it's not in "specific discussions" with AT&T/Verizon about managed services deals.
Fri, Jun. 6, 5:43 PM
- An April 28 e-mail (just made public) from an advisory group suggests Ericsson (ERIC) is close to winning a major phone number contract currently held by Neustar (NSR).
- The 5-year contract covers the transfer and management of 500M+ phone numbers, and will kick in after the current contract expires on June 30, 2015. The FCC has the final say on who wins it.
- Bloomberg observes Neustar has generated $3B+ in revenue from number-switching, which it has exclusively handled since 1997.
- Ericsson has been trying hard to grow its telecom software/service exposure, and thus cut its dependence on a slower-growing, relatively low-margin mobile infrastructure market.
- Ericsson bought top telecom billing and provisioning (OSS/BSS) software vendor Telcordia in 2011, and has made complementary acquisitions since. This week, it rolled out an analytics platform for its OSS/BSS solutions.
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