Optical/IP Networks

Nords Part Ways

Nordic equipment giants Ericsson AB (Nasdaq: ERICY) and Nokia Corp. (NYSE: NOK) today posted contrasting sets of quarterly financials, sending each vendor’s stock in opposite directions.

Ericsson once again beat analyst expectations with second-quarter sales of 38.4 billion Swedish kroner (US$4.92 billion), up 18 percent from SEK 32.6 billion ($4.18 billion) in the same quarter last year (see Ericsson Reports Q2 Growth).

The company made a SEK 5.8 billion ($743 million) net profit in the April-to-June period this year, compared to SEK 5 billion ($641 million) in the previous year. Second-quarter earnings per share came in at SEK 0.37 ($0.05), compared to an average forecast of SEK 0.33 ($0.04) and up from SEK 0.31 ($0.039) twelve months earlier.

The impressive results sent Ericsson shares up 3.5 percent to SEK 26.9 ($3.45) at press time.

Ericsson’s CEO Carl-Henric Svanberg bought further cheer to the company’s fortunes by upgrading its market forecast for mobile infrastructure sales in the next six months from “slight” to “moderate” growth. “For us, moderate doesn’t get up to double digits, but we believe we will get growth in the marketplace of higher single digits,” he told a press conference in Stockholm. “That’s quite obvious now. We are seeing the market develop step by step more favorably than we anticipated.”

Analysts at Lehman Brothers regard this forecast as “conservative,” and they predict revenue growth of 10 percent in 2005. “In our view, Ericsson remains well positioned within the market and its long-term outlook continues to be strong given improving market conditions,” reports a research note.

Meanwhile, shares in Finnish rival Nokia had plunged 10.68 percent at press time to €13.13 ($15.91) per share, on the back of disappointing profits and a weak third-quarter forecast (see Nokia Sales Up 25%).

Although Nokia posted a 25 percent year-on-year rise in total net sales, up from €6.5 billion ($7.88 billion) last year to €8.1 billion ($9.82 billion), second-quarter net income came in at €799 million ($968 million), below analyst expectations of €869 million ($1.05 billion).

Second-quarter earnings per share were €0.18 ($0.22), below the average analyst estimate of €0.19 ($0.23). Nokia predicts its third-quarter earnings per share will be between €0.14 ($0.17) and €0.17 ($0.21), compared to €0.15 ($0.18) a year ago and well down on analyst forecasts of €0.20 ($0.24).

Operating profits also fell in both the mobile phone and networks divisions, and the vendor forecasts only slight growth in the mobile infrastructure market for the rest of the year.

“It's clear that Ericsson is the big winner this time round and has picked up market share,” writes Ovum Ltd.’s Martin Garner in a research note.

— Justin Springham, Senior Editor, Europe, Unstrung

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