Ericsson Rises Most in More Than a Month as Sales Beat Analysts' Estimates
By Diana ben-Aaron - Jan 25, 2011
Ericsson AB, the world’s largest maker of wireless networks, rose the most in more than a month in Stockholm trading after fourth-quarter sales beat analysts’ estimates.
Revenue rose 8 percent in the period to 62.8 billion kronor ($9.6 billion), exceeding the 59.5 billion-kronor average estimate from 36 analysts. Net income rose to 4.32 billion kronor from 314 million kronor in the year-earlier period, the Stockholm-based company said today in a statement.
“They beat top-line expectations especially in the core area, wireless networks, and that’s what people will focus on,” said Haakan Wranne, a Stockholm-based analyst at Swedbank Markets.
Chief Executive Officer Hans Vestberg boosted sales by 14 percent in the network-equipment division as Ericsson completed its first full year with new capacity acquired from Nortel Networks Corp. Additionally, phone companies upgraded their mobile broadband networks to cope with demand for music, video and Internet access on smartphones.
Ericsson expects the “strong uptake for mobile broadband to continue in 2011,” CEOVestberg said in the statement. Low- end smartphones and tablets will help drive the growth, he said.
Ericsson shares rose as much as 4.1 percent, the biggest gain since Dec. 16, and traded 3.9 percent higher at 80.10 kronor at 9:48 a.m. in Stockholm.
“After almost two years of missing expectations, Ericsson’s revenues finally beat” estimates in the fourth quarter,” Nomura International Plc analysts including Stuart Jeffrey wrote in a note to investors.
Global Markets
Component supply problems have eased, although deliveries still have not caught up, the company said.
Global services sales declined 1 percent on exchange rates, while sales of managed services gained 5 percent as phone companies outsourced their network management to cut costs.
North America remained Ericsson’s biggest market and grew 49 percent, slowing from triple-digit growth earlier in the year. Northern Europe and central Asia, China and northeast Asia also grew. Sub-Saharan Africa declined the most as operator budgets tightened, followed by southeast Asia and India.
The company, based in Stockholm, faces challenges from competitors including China’s Huawei Technologies Co., which says it intends to overtake Ericsson. Equipment prices have declined even after Nortel assets were taken over by Ericsson and other companies, cutting out a competitor.
Wireless Market
The wireless equipment market won’t recover to its record 2008 level of $43 billion until after 2015, according to the most recent estimates by Redwood City, California-based Dell’Oro Group. The global wireless gear market was probably worth about $34 billion in 2010, analyst Stefan Pongratz said by e-mail.
Sony Ericsson Mobile Communications AB, the mobile-phone venture with Sony Corp., last week posted fourth-quarter net income of 8 million euros ($10.7 million), missing analyst estimates as an outdated product portfolio hurt Christmas sales.
The company’s chipmaking joint venture, ST-Ericsson, reported a net loss of $177 million on lower sales.
