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Analysts expect tough times for Ericsson and other telephone operators

Tuesday, 10 April 2012
Analysts, Nomura expects that telecom operators will continue to be cautious with their investments in the first quarter, which will weigh on the results of Ericsson, Alcatel-Lucent and Juniper.

According to an analysis made on 10 April, Nomura reflected on the low level of investment already in the forecasts of the sector and estimates that the loss of recovery during the second quarter could lead to worsening outlook for companies in the sector.

"We believe that investors have seen past the second quarter and expect a recovery in the U.S. in the second half, but we expect that the operators' global capex will remain unchanged or fall slightly in 2012 as a result of low investment in Europe, "wrote Nomura according to news organisation, Direkt

For the business segment, the level of investment in communications equipment is still however, seen as positive, with some expectation coming from Europe.

Ericsson, Cisco and Ciena are still Nomura's Top Options in the sector but the view of the sector suppliers of communications equipment remains negative (bearish).

Nomura expects that Ericsson will benefit from a stabilization and recovery in gross margins in the medium term, which should lead to improved profitability in the second half and set in 2013. In the first quarter it is expected that Ericsson's gross margin is estimated to stand at 31 percent, according to Nomura.

Nokia faces continued challenges in the short term and the risk that the launch of Lumia 900 by AT & T will be a disappointment, is held strong by Nomura.

There is a risk of further downgrades to earnings estimates for Nokia throughout 2012, but a more favourable investment improvement may appear from the beginning of the fourth quarter when Windows Phone 8 with a broader ecosystem is launched, say analysts.
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