Ericsson Crystal Ball Still Cloudy

Whatever new Ericsson AB (Nasdaq: ERIC) CFO Jan Frykhammar's crystal ball has told him about the telecom market in 2010, he didn't enlighten us with that insight today but said that there would be "continued uncertainty" in global operator spending behavior this year.

Talking to Unstrung this morning, following the Swedish vendor's fourth-quarter and full year earnings announcement, Frykhammar remained mum on the outlook for the telecom equipment and services market in 2010. (See Ericsson Keeps Its Distance From Huawei .)

"There will be continued uncertainty in the market, so it's wise of us not to guide," said Frykhammar, adding that there was a "mixed trend" in the marketplace for 2009 so providing an outlook for 2010 would be difficult.

2009 was tough for Ericsson, with infrastructure revenues, in particular, down 5 percent compared with 2008. And operator spending patterns in 2009 varied across the globe, according to the vendor. Operators in Central Europe, the Middle East, and Africa were "increasingly cautious" in their network investments, while in China, India, and United States, there was "good development with major network buildouts," Ericsson noted in a statement.

Looking ahead to 2010, Ericsson's broad, and vague, ambition is to "grow faster than the market," as stated by new CEO Hans Vestberg during the vendor's fourth-quarter earnings press conference this morning.

But when Unstrung asked Vestberg's numbers man, Frykhammar, to explain what that goal means he said that such a target would be measured in net sales, but he would not disclose how Ericsson expects the market to go this year or how Ericsson expects to perform relative to the market.

2G sales in decline
Ericsson's infrastructure business last year was especially hurt by a decline in 2G GSM equipment sales that was not offset by sales of 3G WCDMA equipment.

So, when will the vendor's WCDMA equipment sales make up for the decline in revenues from GSM equipment?

"I know you want that answer -- I want that as well, " said Frykhammar. "We don't know. It depends on operator behavior. It's difficult to say, timing-wise, when WCDMA will offset GSM."

As for top-line growth in Ericsson's newly acquired CDMA business from Nortel Networks Ltd. , Frykhammar said that should not be expected. In the fourth quarter of 2009, Ericsson recorded SEK2.7 billion (US$375 million) in revenues from five weeks of operation at the CDMA business, mostly from network infrastructure sales. (See Ericsson Kickstarts Nortel Integration Plans, Nortel Wireless Winner: It's Ericsson!, Ericsson Buys Nortel's GSM Biz Too, and Ericsson: Why We Want Nortel's Wireless.)

"It's a mature technology, and we have to assume certain decline in the business," he says. "I would not expect that asset to grow in the top line."

— Michelle Donegan, European Editor, Unstrung

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