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Ericsson & Qualcomm Accomplish China's First Data Call

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Telefonaktiebolaget LM Ericsson (publ) (ERIC - Free Report) and Qualcomm Technologies, Inc., an operating unit of QUALCOMM Incorporated (QCOM - Free Report) , recently announced the completion of China’s first end-to-end data call, using the new cellular Internet of Things (IoT) eMTC/Cat-M1 technology. Development and commercialization of an ecosystem for cellular IoT solutions is one of Ericsson’s topmost priorities and it has been forging strategic collaborations to fulfill this objective.

eMTC/Cat-M1 is a new cellular IoT technology, which was standardized in 3GPP Release 13, for low-power wide-area (LPWA) applications and services. The data call was conducted by using Qualcomm Technologies’ MDM9206 LTE modem and Ericsson Networks Software 17A, at the lab of the research division of China Mobile Research Institute.

This latest technology can support a variety of LPWA use cases that require higher mobility support. Ericsson and Qualcomm remain confident that this will help in improving performance in terms of terminal cost, standby time and coverage, compared with the existing 4G technologies. eMTC/Cat-M1 technology can also support the delivery of a gamut of IoT services, including smart energy, asset tracking, industrial control and so on.

Ericsson has a dominant presence in high-traffic LTE markets across the globe, carrying 40% of the world's total mobile traffic. As operators continue to invest in telecom core networks for deployment of new service offerings, such as Voice over LTE, Ericsson is poised to benefit significantly from it.

Despite solid restructuring actions and a dominant market share, Ericsson has been on wobbly grounds for quite some time now, recording an average negative return of 40.1% year to date, far worse than that of the Zacks categorized Wireless Equipment industry’s negative return of 7.3%. Soft mobile broadband demand, slowdown in emerging markets and weaker-than-expected benefits from cost-cutting initiatives have thwarted the company’s growth significantly.

With three back-to-back earnings misses, over the trailing four quarters, Ericsson has an unimpressive average negative earnings surprise of 23.0%. Further, with the Zacks Rank #4 (Sell) company’s earnings estimates moving south, over the past couple of months, there is no immediate respite in sight. The Zacks Consensus Estimate for 2016 earnings descended from 41 cents to 33 cents, over the past two months. This is attributable to five downward estimate revisions compared with none upward.

Stocks to Consider

Some better-ranked stocks in the same space include Ubiquiti Networks, Inc. and Harris Corporation , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Networking products and solutions provider, Ubiquiti Networks has an excellent earnings surprise history, beating estimates each time, over the trailing four quarters. It has a positive average surprise of 19.7%.

Harris Corporation is an international company, focused on communications equipment for voice, data and video applications. The company has an impressive earnings surprise history for the trailing four quarters, beating estimates all through, for an average of 4.2%.

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