Ericsson seeks 2002 turnaround

LONDON (FT Investor) - The European stock market focus will shift from consumers' appetites for mobile phones to network operators' demand for equipment when Sweden's Ericsson follows Finnish rival Nokia in reporting fourth quarter and full year figures on Friday.
The two companies both make handsets and network equipment but about 80 per cent of Ericsson's [SE:000010865, News, Chart, Research] revenues come from infrastructure sales compared to some 25 per cent for Nokia [SE:000053994, News, Chart, Research] , which has a 37 per cent share of the global mobile phone market.

Network equipment revenues have been under pressure with debt-burdened operators deferring purchases. But better than expected margins in its Networks business helped Nokia [US:NOK, News, Chart, Research] beat fourth quarter earnings targets on Thursday.

The company said it expected the overall networks market to be flat in 2002 compared to a 10-15 per cent rise in volumes for mobile phones. It expected its own network sales to fall 16-20 per cent in the first quarter compared to the same period in 2001.

Ericsson downgrade

As the world's largest mobile network equipment supplier, Ericsson [US:ERICY, News, Chart, Research] has been hit hardest by the downturn and 28 analysts polled by Six Markets Estimates forecast on average a net loss of SEK 3.12bn (€0.34bn) in the fourth quarter and SEK 20.89bn (€2.26bn) for the year.

Sales are expected to come in at SEK 54.87bn (€5.94bn) for the fourth quarter and SEK 228.17bn (€24.69bn) for the year.

Analysts at ABN Amro downgraded Ericsson [UK:ERI, News, Chart, Research] to 'Reduce' from 'Hold' last week ahead of the figures, with a price target of SEK 46. Ericsson shares rose 4.4 per cent to SEK 49.70 on Thursday on the back of Nokia's stronger-than-expected results. See Nokia results story

ABN Amro said it expected a number of operators to scale back their spending in 2002 and also foresaw a slow uptake of the latest 2.5G GPRS services hitting infrastructure investment. It forecast overall sales to fall 4 per cent in 2002 to SEK 203.2bn (€22bn).

In mobile phones, Ericsson has around 8 per cent market share through its joint venture with Sony, launched on October 1 last year. Sony Ericsson's goal is to become the leader in multimedia communication devices in five years, but its first branded products are not due till the Spring.

Ericsson warned in October it expected sales to be flat to 10 per cent down in 2002. See Ericsson Q3 results

But future results should be helped by SEK 20bn (€2.16bn) cost savings expected this year. A new chairman, Electrolux chief executive Michael Treschow, will take up his post in March.
(Quelle: Financial Times)

So long,
Calexa