Ericsson's (ERICY) bang-up first-quarter earnings are helping to keep Wall Street's wireless optimism afloat.
The Swedish wireless gearmaker offered a
pleasant surprise Friday morning, with strong sales in a seasonally weak quarter -- complemented by much wider margins than timorous industry watchers anticipated.
The quarter "should allay concerns that Ericsson's business was going to weaken and margins would crack," wrote Lehman Brothers analyst Tim Luke in a research note Friday.
But aside from putting up good numbers, Ericsson was less than forthcoming on its view of the future.
"For 2005 we maintain our view that the global mobile systems market will show slight growth compared to 2004," the company said Friday.
On a conference call with analysts, Ericsson executives declined to offer any specifics on their outlook for the current quarter ending in June. CEO Carl-Henric Svanberg said the company would like to get away from offering projections, saying Ericsson execs would rather give no guidance than "misguide."
The lack of direction from the company left some analysts to ponder what exactly lies ahead for the No. 1 wireless network equipment supplier.
"Ericsson will maintain a leadership position in market share for wireless infrastructure," says John Bucher, an analyst at Harris Nesbitt Gerard. But, says Bucher, the company may have reached a peak in terms of its turnaround efforts, particularly on things like operating cost reductions.
"I'm not sure there's a lot of upside," says Bucher, who has a neutral rating on Ericsson.
Ericsson is in the midst of a product shift as wireless telcos make 3G upgrades. The transition to universal mobile telecommunications systems, or UMTS, technology gives Ericsson less cost savings advantage than older gear. The company has less ability to keep prices up as it battles for new business.
"There's a slight concern that some of the business will come at lower operating profit," says Bucher.
Ericsson's shares rose 73 cents Friday to $30.93.