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Optical/IP

Ericsson Coy on M&A

4:15 PM -- On the third quarter earnings call today, Ericsson AB (Nasdaq: ERIC)'s president and CEO Carl-Henric Svanberg suggested that the global financial crisis will weaken some struggling telecom vendors and turn them into acquisition targets, but he didn't say whether Ericsson was ready to buy. (See Ericsson Soars on Strong Q3.)

"This is a time when the weak tend to get weaker and leaders get stronger," he said. "This is a time for us to leverage our leadership, but how do you do that? We are cautious. Times like this may bring opportunities, but we're hesitant to take on large integration work."

At the Carrier Ethernet World Congress in Berlin last month, the scuttlebutt was that Ericsson and Huawei Technologies Co. Ltd. had instructed their banks to scout out Nortel Networks Ltd. 's Metro Ethernet Networks (MEN) business, which the Canadian vendor wants to offload for cash. Svanberg's comment today could indicate that he doesn't find a Nortel MEN acquisition very appealing. (See Huawei Seen as Likely Nortel Suitor and Nortel to Sell Carrier Ethernet, Optical Biz.)

Svanberg also said that Ericsson was working hard to further develop its metro Ethernet products. "When it comes to metro Ethernet, we're in the process of developing our program quite strongly," he said. "It's the part [of the network] mostly affected by strong traffic increases."

With the financial crisis looming over telecoms equipment vendors and threatening operators' capex plans, Ericsson hasn't ruled out vendor financing as an option if needed, unlike rival Nokia Networks . (See Vendor Financing Not in the Cards and Nokia Siemens Shrinks in Q3.)

"When vendors become banks, you can't make the numbers," said Svanberg. "We have no plans for doing any large customer financing... But let's see what happens in the market."

— Michelle Donegan, European Editor, Unstrung

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