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Optical/IP

Ericsson's Managed Growth

4:30 PM -- Argus Research Co. analyst Jim Kelleher is homing in on how Ericsson AB (Nasdaq: ERIC) is building momentum in the U.S. this year. First, Kellenher notes Ericsson's "breakthrough" contract with Sprint Corp. (NYSE: S) to manage the wireless operator's networks. (See Ericsson, Sprint in $5B Managed Services Deal.) Next, he cites Ericsson's winning bid for Nortel's wireless assets. (See Ericsson: Why We Want Nortel's Wireless.)

"We believe Ericsson has established a strong U.S. foothold precisely when the economy is beginning to revive; accordingly, Ericsson will participate in some deferred network expansion plans," he writes. He also notes that, when you add in the Sprint deal, the U.S. is Ericsson's largest market, served by 14,000 employees.

Of course, today we're reporting that Ericsson also seems one of the more likely suitors in the bid to buy Nortel's Metro Ethernet Networks group. (See Is Ericsson the Hope for Nortel's MEN?) That would only add to the company's Great American Emergence.

But, the Argus note did make me wonder: Would Ericsson have more influence in the U.S. market by simply securing a few more managed services deals? Acquisitions will only take you so far. Running networks seems to be the path of true expansion for what we used to call "telecom equipment makers" or, colloquially, "TEMs."

Argus has a Buy rating on Ericsson shares, with a price target of $13.

— Phil Harvey, Editor-in-Chief, Light Reading

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