Ericsson Just Dropped a Huge Clue for These Upcoming Reports

Swedish telecom equipment giant Ericsson (Nasdaq: ERIC  ) just reported third-quarter results. It wasn't pretty, and the bombshell sent shock waves across the sector.

Ericsson's net income plunged 41% year over year and failed to meet the expectations of European analysts. Cost-cutting efforts have reduced the company's operating expenses by 7% over the last year, but gross margins dropped from 35% to 30.4%, wiping out the benefits of that trend.

CEO Hans Vestberg said that macroeconomic pressures are holding back telecoms across the globe from investing in new networks, which is news to absolutely nobody.

But the breakdown of spending trends may come as a surprise: Vestberg explained that North American customers are in fact buying plenty of equipment right now -- the weak spots are found in places like "parts of Europe, China, Korea and Russia."

That's half the BRIC bloc putting the brakes on high-tech growth. This tidbit goes a long way toward explaining today's market action in the long-distance networking sector.

Ericsson plunged more than 5% on the report, which of course makes it the worst performer among the industry's major competitors. Alcatel-Lucent (NYSE: ALU  ) shares fell 2.4%, since the French-American company makes most of its sales in the areas Ericsson just pointed out as troublemakers -- only 37% of Alcatel's revenue comes from the benign North American market.

But American specialists gained on the news. Ciena (Nasdaq: CIEN  ) reports 60% of its revenue in the U.S. and Canada, and its shares jumped 2.4% today. Sonus Networks (Nasdaq: SONS  ) is even more reliant on American sales, with a staggering 73% of its business happening here, and that stock soared a sector-leading 2.8%. There's a very geographical pattern developing here.

Ericsson's report is rightly seen as a weather vane for the industry. Most of its head-to-head rivals will report results in the coming couple of weeks, and investors feel like they got an early clue on these unreported results today.

The mobile revolution is still in its infancy, but with so many different companies it can be daunting to know how to profit in the space. Fortunately, The Motley Fool has just released a free report on mobile named "The Next Trillion-Dollar Revolution" that tells you how. Inside the report, we not only describe why this seismic shift will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, and you can access this new report today by clicking here -- it's free.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2079132, ~/Articles/ArticleHandler.aspx, 10/21/2014 4:39:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement