Ericsson Soars on Q4 Results

LM Ericsson's (Nasdaq: ERICY) share price rose steeply this morning on the back of an impressive set of fourth quarter figures, as the Swedish company joined rival vendors in predicting a possible industry upturn for 2004 (see Ericsson Impresses in Q4).

An adjusted pretax profit of SEK 5.5 billion ($753 million) -- against a loss of SEK 2.1 billion ($288 million) a year earlier -- saw Ericsson's share price soar 15.1 percent at time of press to SEK 21.4 ($2.93).

Net sales were also up, with fourth quarter revenues of SEK 36.2 billion ($4.96 billion) against analyst expectations of SEK 33.3 billion ($4.56 billion).

Today’s results mark a return to form for the world’s largest network infrastructure supplier. The turnaround builds on last year’s small third quarter profit and ends a period of massive restructuring and gloomy financials (see Ericsson Back in the Black and Ericsson Rebuilds Exec Team).

“We are through a turnaround that has been very successful,” CEO Carl Henric-Svanberg told a press conference in Stockholm. “Of the 51,000 employees we have, and you are aware of the target of 47,000, 3,000 are already on the way out and no longer part of our operations. We have another 1,000 to go which will be completed by the summer.” At the height of the telecom bubble, Ericsson had a headcount of more than 105,000 worldwide.

Henric-Svanberg is optimistic that the infrastructure market will grow this year, amending the previous quarter’s forecast that 2004 will only be “in line” with 2003’s performance.

“We expect some slight growth for the year as a whole,” he commented. “3G rollout is now accelerating…. In 2005 we will see the mass market begin to develop.”

Such upbeat comments echo rival vendors' belief that the market is heading for better days (see Nokia Hits Higher Targets, Wireless Kit Back From the Dead and Nokia Sees Network Boost).

Henric-Svanberg added that Ericsson is involved in eight of the ten 3G W-CDMA (Wideband Code Division Multiple Access) networks launched so far, and has a presence in the rollout of a further 46 networks.

Analysts are surprised at the strength of Ericsson’s recovery. Nomura Holdings Inc.’s Dr Richard Windsor describes the results as “stunning,” noting that “these excellent results are likely to lift expectations for Ericsson further.”

Meanwhile the vendor has also announced its intention to step up efforts in “emerging markets” (see Ericsson Touts Expander). Ericsson plans to focus on regions of relatively low wireless development where there is the potential for massive future growth. The move follows a similar announcement by Nokia Corp. (NYSE: NOK) last August (see Nokia Offers Cheap GSM).

— Justin Springham, Senior Editor, Europe, Unstrung