BUSINESSWEEK ONLINE : JULY 10, 2000 ISSUE
INTERNATIONAL -- ASIAN COVER STORY

Ericsson: Wireless Workhorse (int'l edition)


Ericsson may be a 124-year-old company, but it is a big player in the New Economy. The Stockholm giant is the world leader in designing and supplying mobile-telephone networks for operating companies in Europe and across the globe. The operators plan huge expenditures over the next few years to boost their wireless capacity to carry not only voice but also massive volumes of Internet traffic. Ericsson is well-positioned to cash in on what may be one of the great business booms of all time.

Recognition of its network knowhow is the main reason that Ericsson's stock price has more than tripled since last year, pushing it from No. 77 to No. 22 in the Global 1000. ''The market has woken up to the fact that Ericsson is a very strong mobile infrastructure company,'' says Ian Burgess, an analyst at Credit Suisse First Boston in London. Over 80% of Ericsson's earnings before interest and taxes comes from designing and supplying the radio bay stations, switches, and transmission equipment that make mobile telephony possible.

Ericsson hasn't always gotten credit for that. A year ago, investors and analysts were shunning the company. Even the board lost patience with its sputtering earnings and problems in the handset and fixed-line telephone units. On July 7, CEO Sven-Christer Nilsson was sacked and replaced by Kurt Hellstrom, the head of Asia operations. A year later, not only has the stock been on a tear, but earnings are expected to nearly double for this year, to $3.8 billion, on revenues of $31.7 billion.

Hellstrom is given credit for stopping the losses in the fixed-line business and tightening financial discipline. But he concedes that a shift in market perceptions helped the company. ''A year ago, we were rather undervalued,'' he says. ''I think there has been a correction.'' In 1999, investors mistakenly focused on Ericsson's losing battle in the handset business with Finnish rival Nokia Corp. This year, they have focused on Ericsson's strength in mobile infrastructure.

Infrastructure now looks like the place to be. Telephone operators in Europe and elsewhere are planning to spend tens, if not hundreds, of billions of dollars on so-called third-generation mobile networks. These will offer users not only voice communications but also access to the Internet, bringing all sorts of data and entertainment products through the airwaves. Ericsson could pull in 50% or more of this business. That could push up earnings growth by an additional 27% in 2001, CSFB estimates.

Ericsson is also trying to address its shortcomings in the handset area. It is a leader in so-called WAP (wireless application protocol) phones for Internet access. The company now has six such phones on the market. It recently launched two new offerings in Singapore--the T36 and R520. Along with WAP, these phones feature a headset that connects to the phone unit without wires through so-called bluetooth radio technology. Europe will see the T36 in the fourth quarter, says a spokeswoman. There is plenty of life in old Ericsson yet.

By Stanley Reed in London

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

BACK TO TOP


RELATED ITEMS
The Global 1000 (int'l edition)

ASIAN COVER IMAGE: The Global 1000

TABLE: Market Guide for Investors

TABLE: How the Giants Stack Up

Ericsson: Wireless Workhorse (int'l edition)

Emerging Markets: Asia Calling

TABLES: The Global 1000 (.pdf) (int'l edition)



INTERACT
E-Mail to Business Week Online

 
Copyright 2000-2009, Bloomberg L.P.
Terms of Use   Privacy Notice