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Ericsson Joins NVIDIA to Boost Virtualized 5G RAN With GPU

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Leading Swedish telecom equipment maker, Ericsson (ERIC - Free Report) , and NVIDIA Corporation (NVDA - Free Report) recently announced technology collaboration focused on enabling communication service providers build high-performing and completely virtualized 5G radio access networks (RAN).

Their common goal is to commercialize virtualized RAN technologies to deliver radio networks with flexibility and shorter time to market for services like augmented reality, virtual reality and gaming. Operators are exploring alternative technologies and RAN architectures amid growing interest for virtualization, while securing the best possible user experience.

Markedly, the strategic alliance brings together Ericsson’s expertise in RAN technology with NVIDIA’s leadership in graphics processing unit (GPU)-powered accelerated computing platforms, along with artificial intelligence and supercomputing.

However, the most important industry challenge is to virtualize the complete RAN solution in a cost-, size- and energy-efficient way, comparable with traditionally built RAN networks. This is where the joint initiative seeks to examine that how these challenges can be addressed in a commercially feasible way.

At September end, Ericsson had announced commercial 5G deals with 27 named operators. Across radio and core, it supplied equipment to 19 live 5G networks. The company continues to witness strong momentum in its business, based on the strategy to increase its investments for technology leadership, including 5G.

In Networks segment (which accounts for the lion’s share of total sales), its ongoing activities are to invest in R&D to safeguard a leading product portfolio and cost leadership; increase investments in automation and serviceability driving down costs; and selectively gain market shares based on technology and cost competitiveness.

In the last earnings report, Ericsson’s net sales from Networks increased 9.5% year over year to SEK 39.3 billion. The rise was mainly driven by good traction for the Ericsson Radio System. Notably, sales growth in North America was strong, backed by 4G and 5G investments.

The segment’s gross margin grew to 41.6% year over year from 41.3% led by higher IPR licensing revenues and a favorable business mix. Operating margin improved to 18.4% from 15.7% on the back of higher sales and gross margin. The company’s target for Networks is to generate an operating margin of 15-17% (excluding restructuring charges) by 2020.

Over the past three months, shares of Ericsson have increased 3.2% compared with the industry’s growth of 2.4%.

Ericsson currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the industry include Nokia Corporation (NOK - Free Report) and PCTEL, Inc. (PCTI - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nokia surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 89.3%.

PCTEL surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 146.4%.

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