As Ericsson (ERICY) gets set to report fourth-quarter earnings Friday, investors cheered reports that the wireless gearmaker enjoyed an exceptionally good end to the year.
Shares of the tech giant rose 4%, hitting a 52-week high, after Stockholm business daily
reported that Ericsson executives will pronounce the company's financial woes over. Citing internal sources, the paper says fourth-quarter net income was 2.4 billion kronor, or $329 million.
But according to the report, Ericsson executives will give a pessimistic assessment of the 2004 wireless infrastructure market and lower expectations by calling for demand to be flat with last year's levels.
An Ericsson representative said there was nothing new in the
report, and declined to comment on the company's financial results, which are scheduled to be released at 4 a.m. EST Friday.
The company's earnings report comes at the end of a hectic week for the communications gear sector. On Tuesday, U.S. juggernaut
posted strong earnings but issued a tepid growth forecast. That news drove shares in the previously sizzling networking sector decisively lower. On Thursday, Ericsson added 85 cents to $23.38, leaving the stock up nearly 30% for the year.
surprisingly strong fourth-quarter performance last month, Wall Street has been expecting a similarly compelling performance from Ericsson. Analysts expect sales of $4.5 billion in the fourth quarter. That is flat with year-ago levels, but represents a 45% sequential increase.
With unfavorable currency exchange rates and a host of restructuring charges expected in the fourth quarter, earnings estimates range from an 8-cent-a-share loss to a 9-cent profit.
In the telecom gear market, first-quarter sales are typically much weaker than fourth-quarter results due largely to money available in phone companies' budgets. Nokia's strength and wide margins were attributed in part to a so-called budget flush as phone companies used leftover cash to make last-minute purchasing decisions. In Nokia's case, a fair portion of the sales in the latest quarter were for an earlier generation of wireless equipment, which is usually produced at a lower cost than cutting-edge gear.
Ericsson is expected to be a beneficiary of this same dynamic. But observers caution that sales of third generation, or 3G, network equipment will likely be lackluster as telcos continue to conserve scarce cash.