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Ericsson cuts market growth view, looks beyond networks

Reuters Stockholm | Updated on January 22, 2018 Published on November 10, 2015

Ericsson, the world's biggest mobile network equipment maker, pared back its market growth forecast on Tuesday, but said it could expand beyond its mainstay networks business, aided by a new deal with data network supplier Cisco.

The Swedish company said it expected growth in the overall markets in which it competes to average 2-4 per cent per year between 2014 and 2018, down from its previous estimate, issued a year ago, for 3-5 per cent growth in 2013-2017.

Ericsson has been struggling this year as sales have fallen 7 per cent on a like-for-like basis and were roughly flat over the previous three years, raising questions over its growth prospects in its highly competitive markets.

"The strategy is clear, we want to be improving the core areas - profitability, and of course having growth there as well," Chief Executive Hans Vestberg told investors at Ericsson's annual capital markets day meeting. "We are not yet where we are satisfied," he said.

For its mainstay networks unit, which accounts for roughly half of sales, Ericsson said it saw on average 1-3 per cent annual market growth, and 3-5 per cent for telecom services, while support solutions offered to network operators, still a tiny part of its business, were seen growing 7-9 per cent.

Ericsson said sales in the areas targeted for growth were 45 billion Swedish crowns ($5.2 billion) in the year through September 30, up from 35 billion in the year-ago period, and repeated it sees market growth of 10 per cent a year in those areas.

It was the first time Ericsson has disclosed sales figures for new growth areas where it has been investing heavily, responding to calls from investors to be more transparent. These new markets include TV and media, IP routing, cloud computing and business software for service providers.

Ericsson shares were down 3.9 per cent by 0958 GMT, within a Stockholm blue-chip index down 1 per cent. That erased a 2 per cent rise on Monday after news of a key partnership deal with US networks firm Cisco to sell each other's products, which Ericsson called its largest such deal to date.

That deal led shares of Cisco rival Juniper - long considered a likely Ericsson acquisition candidate - to tumble 7.8 per cent on Monday.

On stage at the investor event with Cisco Executive Chairman John Chambers, Vestberg said a sales partnership made more sense than any merger, as a faster way of achieving benefits with less risk.

Published on November 10, 2015
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