Eurobites: Analyst Upgrades Ericsson as Huawei Backlash Intensifies

Ray Le Maistre
12/20/2018

In today's regional roundup: Huawei's troubles could be good news for Ericsson; Enea lines up another acquisition; Orange Business Services lands smart meter IoT deal; Ciena heads to the UK countryside; and more Ericsson.

  • The "emerging backlash toward Huawei" is presenting "longer-term opportunities for Ericsson," according to Raymond James Analyst Simon Leopold, who has upgraded his rating on the Swedish vendor to "Market Perform." Leopold notes that network swaps take time but that Ericsson AB (Nasdaq: ERIC) is in a position to take market share in EMEA, Latin America and non-China Asia-Pacific that would boost its sales and earnings. These opportunities are not likely to impact financials in the very near term, but the analyst believes that each percentage of market share in the radio access network (RAN) market is worth about US$350 million in revenues. However, there are still many obstacles in the way, notes Leopold, not least that the likes of Nokia, Samsung and ZTE will also be chasing any business that Huawei Technologies Co. Ltd loses, plus the fact that Ericsson's portfolio, now much more focused on mobile access, "lacks diversity": In addition, the backlash might ultimately have little actual impact on the market status quo. But clearly Leopold and his Raymond James colleagues sense that the current shift in market sentiment is set to benefit Ericsson in some way: The Swedish vendor's share price has gained about 8% in value during the past month, but is down almost 2% early Thursday on the Stockholm exchange at SEK 78.90. (See Huawei's Hu Hits Back and Where Huawei Fears to Tread.)

  • Still in Sweden, networking software specialist Enea AB , already well known for its NFV suite of products, is set to buy a business unit that specializes in policy management, authentication and user management tools from Atos Convergence Creators for €18 million ($20.7 million). The purchase of the unit, which is headquartered in Austria and has annual sales of about €12 million ($13.8 million), is expected to close in March 2019. Enea believes that the ability to manage subscriber information, along with authentication and policy management, will be "some of the most important building blocks for [the] creation of new business models and customized service offerings," in a 5G environment, and so sees this move as important to strengthening its 4G as well as 5G portfolio. "I am proud to announce a new strategic acquisition that strengthens our portfolio of key applications for the mobile network. This complementary acquisition would, together with solutions that we previously acquired through Openwave Mobility and Qosmos, build an even stronger portfolio and offering for the mobile network of today and tomorrow," noted Anders Lidbeck, the current CEO, who is set to move upstairs to become chairman in 2019. (See Enea Snaps Up Network Intelligent Specialist Qosmos and Enea, Marvell & PicoCluster Announce World's Most Compact OPNFV Pharos Lab.)

  • Nova Veolia, the digital services operation of French utility services and resource management specialist Veolia, and its subsidiary Birdz, which focuses on smart meters, have chosen Orange Business Services to help them digitalize Veolia's water-related services in France. More than 3 million smart water meters will be connected to Orange's LoRa IoT network in France as Veolia aims to read more than 70% of its meters remotely by 2027.

  • Alternative UK fiber broadband access operator Gigaclear Networks has deployed Ciena's 6500 Packet Optical system as part of its 100G transport infrastructure. Gigaclear, which focuses on deployments in rural areas of the UK, is using the Ciena Corp. (NYSE: CIEN) gear to boost its network capacity in the counties of Devon, Somerset, Herefordshire and Gloucestershire. The operator is also deploying Ciena's Blue Planet Manage, Control and Plan (MCP) domain controller software, which will help to automate network and service management processes.

  • Back now to Ericsson, which is to use crowdsourcing-based benchmarking methodologies and data from Swedish network test and professional services specialist P3 to help its mobile operator customers with their ongoing 4G and upcoming 5G strategies. Ericsson isn't the only European vendor making use of P3's skills – Infovista is also a partner. (See InfoVista, P3 Expand Mobile Network Benchmarking Services .)

  • Ericsson is also in the news in Africa. Tigo Senegal, under new ownership since May this year, has selected the Swedish vendor for a three-year network modernization project that will involve the upgrade and expansion of radio access and backhaul infrastructure covering more than 1,000 sites. (See Tigo Senegal Plans Network Boost with Ericsson.)

    — Ray Le Maistre, Editor-in-Chief, Light Reading

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    Duh!
    Duh!
    12/20/2018 | 12:59:58 PM
    Not just Ericsson
    All of Huawei's major western competitors stand to benefit from Huawei and ZTE's travails. Adtran, Calix, Ciena, Cisco, ECI, Infinera, Nokia, Ribbon, and Samsung all come to mind. Huawei customers forced to choose new vendors might also find it an opportunity to accelarate a move to white box/open source solutions, bringing smaller and emerging vendors into play.

    Margin compression has been killing some of the vendors. Since Huawei and (especially) ZTE compete aggressivly on pricing, their involuntary exit from some Western markets will also shore up industry margins, once competitors have established their new footprints in the affected operators.

    -- Dan Grossman