Six months ago, Ericsson (NASDAQ:ERICY) CEO Carl-Henric Svanberg declared the company's financial crisis behind it, and predicted a return to profitability.
"We are on steady ground," he said. Since then, the stock has been on fire, rising 115% compared to the S&P 500's 18% gain. Ericsson has also easily outperformed Nokia (NYSE:NOK) and most everyone else in the industry.
The wireless firm kept that momentum going today, rising over 10% on the strength of a fourth-quarter earnings report that did indeed show a profit of 100 million Swedish kronor, or about $13.6 million. Revenue was down 1%, though Svanberg said the year ended with strong sales.
A lot of the optimism today can be attributed to Svanberg's remarks that the "global mobile systems market" could show some slight growth in 2004. On top of that, he says Ericsson's growth will continue, with revenue for the current first quarter now expected to come in 5% to 10% ahead of last year's total.
Another bit of good news is the sharp rise in the business' gross profit margin, from 32.6% to 41.6%. The extensive cost-cutting and restructuring program, which has so far seen the elimination of 13,000 jobs, is apparently paying off.
Investors should take a cautious view at this point, however. Ericsson says some of its recent growth may be attributed to customers just catching up on limited spending from last year, and not necessarily an increase in demand. And for more reasons to be wary of the "telecom recovery," check out this article from Rich Smith on Ciena's (NASDAQ:CIEN) recent revenue warning.
Is the telecom recovery for real? Share your thoughts with us on the Telecommunications discussion board.
Rex Moore owns no companies mentioned in this article.
