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Ericsson Inks 5G IP Transport Network Deal With Swisscom

Zacks

Ericsson ERIC recently announced that it has inked a deal with Swisscom AG to provide an end-to-end 5G IP transport network to the latter’s clients. The strategic move will enable Swisscom, a telecommunications provider in Switzerland, to improve scalability and performance of its network.

Swisscom is expected to launch 5G services by the end of 2018. Leveraging Ericsson's Router 6000, the service provider aims to provide end-to-end 5G transport network from radio base stations to the data center to augment capacity, add automation and provide advanced features for its radio and core networks.

Ericsson’s Router 6000 series comprise a set of versatile routers offering the right capacity, resilience and form factors for diverse backhaul networks. It delivers high-performance connectivity for LTE, LTE- advanced and 5G- applications and addresses operators' needs for scalability, security and higher operational efficiency.

Ericsson is actively pursuing three main areas, namely core business expansion, targeted growth and cost & efficiency to fuel growth. The company constantly seeks to seize business opportunities as operators shift toward 4G deployments and prepare grounds for the forthcoming 5G revolution. Ericsson also plans to focus more on software sales and recurring business that complements its thriving Professional Services business in terms of “targeted growth” investments. With such concerted efforts, Ericsson expects to be better-equipped to address the varied needs of its customer segments and capitalize on the market opportunities for faster growth.

With the emergence of the Smartphone market and subsequent usage of mobile broadband, user demand for coverage speed and quality has increased in the recent times. Further, to maintain superior performance as traffic increases, there is also a continuous need for network tuning and optimization. Ericsson, being one of the premier telecom services providers, is much in demand among operators to expand network coverage and upgrade networks for higher speed and capacity. Notably, Ericsson is the world’s largest supplier of LTE technology with a significant market share and has established a large number of LTE networks worldwide.

However, persistent low investments in mobile broadband in certain markets and lower managed services sales have harmed its Networks segment sales while lower legacy product sales have hurt IT & Cloud revenues. Lower IPR licensing revenues and an unfavorable mix between coverage & capacity and services are adding to the company’s concerns. Moreover, Ericsson has been facing investment headwinds in network developments in the Mediterranean, Northern Europe and Central Asia (especially Russia) regions as well as in Latin America and the Middle East. In second-quarter 2018, the company’s Digital Services revenues declined 11% year over year primary due to continued fall in legacy product sales and lower telecom core sales in North East Asia.

Nevertheless, this Zacks Rank #3 (Hold) stock has outperformed the industry in the past year with an average return of 49.1% compared with 27.1% rise for the latter.



Some better-ranked stocks in the industry are Ribbon Communications Inc. RBBN, sporting a Zacks Rank #1 (Strong Buy) and Clearfield, Inc. CLFD and QUALCOMM Incorporated QCOM, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ribbon Communications has a long-term earnings growth expectation of 12%. It delivered an average positive earnings surprise of 168.1% in the trailing four quarters.

Clearfield delivered an average positive earnings surprise of 52.8% in the trailing four quarters.

QUALCOMM has a long-term earnings growth expectation of 10.9%. It delivered an average positive earnings surprise of 19.8% in the trailing four quarters.

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