'Downtick' in Growth Bites Ericsson - TheStreet

'Downtick' in Growth Bites Ericsson

Shares fall 6% after a soft industrywide forecast.
Author:
Publish date:

Ericsson (ERIC) - Get Report sank 6% Friday after the telecom infrastructure company came up a little light in the fourth quarter and tempered its outlook for the year ahead.

The Stockholm wireless-equipment giant posted a net profit of 9.7 billion kronor ($1.39 billion), or 0.61 kronor a share, which includes the benefit of a tax credit used in the quarter ended in December. Those numbers compare with a profit of 8.54 billion kronor, or 0.54 kronor a share, in the year-ago period.

Without the tax credit, analysts estimate Ericsson's adjusted profit was 0.54 kronor a share -- slightly below the target of 0.55 kronor a share some analysts had.

Sales for the fourth quarter were 53.7 billion kronor, up 18% over 45.7 billion kronor last year. Some analysts were looking for sales of 54 billion kronor.

"With our leading positions in mobile networks and professional services, substantial investments in next-generation IP networks and multimedia, we have the platform to continue to capture market share and drive the industry forward," CEO Carl-Henric Svanberg said in a press release.

Looking ahead, Ericsson expects 2007 wireless industry infrastructure sales to grow at the same pace it did in 2006, in the 5% range.

Some observers took this as a downward revision to the company's earlier outlook.

"Guidance of 'mid-single-digit' market growth in 2007 appears a downtick from prior guidance of 'moderate' growth, which we had understood represents roughly 5% to 9%," JPMorgan analyst Ehud Gelblum wrote in a note Friday.

On a conference call with analysts, Ericsson executives said the guidance was for the industry and that Ericsson should grow slightly faster than that.

Analysts surveyed by Reuters Research expect Ericsson's total sales for the year to grow by 11%.

Ericsson shares fell $2.59, or more than 6%, to $36.74 in early trading Friday.