Ericsson (ERIC - Free Report) recently announced that it has inked a deal with Liberty Global plc, the world's largest international TV and broadband company to help it consolidate its European fixed network services and thereby optimize operations. The strategic move would enable Liberty Global to improve availability of network and stabilize it to enhance end-user experience.
Ericsson has undertaken definite steps to consolidate Liberty Global’s operations in six European countries, namely the U.K., Ireland, the Netherlands, Hungary, Poland and Germany. The new contract reinforces the existing business relationship that is centered on the Managed Services contract for mobile networks and fixed field services in Poland, Hungary and Austria.
Ericsson is actively pursuing three main areas, namely core business expansion, targeted growth and cost & efficiency to fuel growth. The company constantly seeks to seize business opportunities as operators shift toward 4G deployments and prepare grounds for the forthcoming 5G revolution. Ericsson also plans to focus more on software sales and recurring business that complements its thriving Professional Services business in terms of “targeted growth” investments. With such concerted efforts, Ericsson expects to be better-equipped to address the varied needs of its customer segments and capitalize on the market opportunities for faster growth.
With the emergence of the Smartphone market and subsequent usage of mobile broadband, user demand for coverage speed and quality has increased in the recent times. Further, to maintain superior performance as traffic increases, there is also a continuous need for network tuning and optimization. Ericsson, being one of the premier telecom services providers, is much in demand among operators to expand network coverage and upgrade networks for higher speed and capacity. Notably, Ericsson is the world’s largest supplier of LTE technology with a significant market share and has established a large number of LTE networks worldwide.
However, persistent low investments in mobile broadband in certain markets and lower managed services sales have harmed its Networks segment sales while lower legacy product sales have hurt IT & Cloud revenues. Lower IPR licensing revenues and an unfavorable mix between coverage & capacity and services are adding to the company’s concerns. Moreover, Ericsson has been facing investment headwinds in network developments in the Mediterranean, Northern Europe and Central Asia (especially Russia) regions as well as in Latin America and the Middle East. In second-quarter 2018, the company’s Digital Services revenues declined 11% year over year primary due to continued fall in legacy product sales and lower telecom core sales in North East Asia.
Nevertheless, the company has outperformed the industry in the past year with an average return of 46.3% compared with 27.3% rise for the latter.
We remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry are Ribbon Communications Inc. (RBBN - Free Report) , sporting a Zacks Rank #1 (Strong Buy) and Clearfield, Inc. (CLFD - Free Report) and QUALCOMM Incorporated (QCOM - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ribbon Communications has a long-term earnings growth expectation of 12%. It delivered an average positive earnings surprise of 168.1% in the trailing four quarters.
Clearfield delivered an average positive earnings surprise of 52.8% in the trailing four quarters.
QUALCOMM has a long-term earnings growth expectation of 10.9%. It delivered an average positive earnings surprise of 19.8% in the trailing four quarters.
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