Ericsson AB
Ericsson earnings fall short, but long-term plans include expansion
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Ericsson AB, a Swedish telecommunication company, published its fourth-quarter earnings. The earnings fell short of analysts’ estimates as a result of weak emerging markets performance in Russia and Brazil. Mobile broadband spending in North America failed, too.
According to Bloomberg analysts Ericsson’s profitability slipped when the Swedish company sold more lower-margin hardware than lucrative software and despite higher patent revenue as well as lower restructuring costs. However, sales rose 8 percent to USD 8.6 billion.
In total Ericsson declined 22 percent in the past year so that market value now exists of SEK 254 billion. Prospective business trends are unclear, which induced analysts of Kepler Cheuvreux and Morgan Stanley to mark fourth-quarter earnings as disappointing.
However, on the long term Ericsson plans to expand into new services like TV and media technology. Latest information include the takeover of Envivio for USD 125 million in September to broaden its TV-presence. Moreover partnerships with other companies, such as Cisco Systems Inc. are part of Ericsson’s plan to sell and promote more complex and comprehensive network systems.
Bloomberg consensus is optimistic and set the 12-month target price to SEK 97,19. Currently, 18 analysts set Ericsson on BUY, 9 on HOLD and 3 on SELL recommendation, which correspond to an aggregated BUY rating.