LM Ericsson (Nasdaq: ERIC ) sure is staying busy these days.
First, the Swedish telecommunications giant reported earnings of $0.04 per share (and per ADR) on $7.01 billion in net sales. That's a modest 3% revenue slip after adjusting for currency rate changes and hedging, but up 11% year over year for comparable units. Mr. Market didn't take kindly to that report, dropping Ericsson's shares like they were hot. Never mind that Ericsson remains a cash machine, growing operating cash flows by 7% year over year to $1.24 billion.
But on the heels of that uninspiring performance, Ericsson stepped up to the plate and beat down all comers in a high-stakes auction for the juiciest parts of bankrupt rival Nortel Networks (NYSE: NT ) . The $650 million bid placed by the combined infrastructure arms of Nokia (NYSE: NOK ) and Siemens AG (NYSE: SI ) turned out to be nothing more than a starting point, as Ericsson plunked down a bid of $1.13 billion to take home the prize.
Nortel is still going to Europe, but to a very different set of open arms. The Nokia-Siemens deal would have created entirely new opportunities for the intrepid buyers, neither of which has much of a presence in the North American markets where Nortel stands strong. Ericsson is simply building on its existing strengths. I am not 100% sure that the Nortel-Ericsson deal will pass muster in antitrust proceedings, though bigger miracles certainly have happened.
Ericsson aims for a massive presence in the world's most exciting wireless markets. Recent multibillion-dollar contracts with both Verizon (NYSE: VZ ) and Sprint Nextel (NYSE: S ) are a great start to that ambition, and Nortel's assets -- bought without any irritating debt loads attached -- will help, too. Ericsson expects Nortel's still-profitable but rapidly declining CDMA signal processing unit to add to Ericsson's earnings in the first year of combined operations.
So Ericsson turns its back on a bad quarter, sunk by big losses from joint ventures with electronics expert Sony (NYSE: SNE ) and ST-NXP Wireless, and sets ambitious goals for the long-term future. Will the Swedes succeed? I think so, and like its Finnish rivals, Ericsson looks like a tasty buy today.
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