2004 was a whopper of a year for Ericsson. The demand for wireless network equipment boomed, and so did Ericsson’s fortunes. Big network build-out across the planet in general, China and India in specific along with severe belt tightening helped the Swedish giant notch up margins north of 25%. Wall Street noticed, and the stock caught fire. Barron’s has an excellent write-up on who the Swedish giant clawed its way back from the brink. But now the company is bringing down expectations because it think that equipment demand is not going to be that strong.
Those levels are exceptional, by any standard. Last year’s operating margins at infrastructure rivals Nokia and Motorola were less than 15%. Ericsson’s best margins during the bubble era were 11.5%. Although the company is forthright in acknowledging that its margins will probably retreat to the “high teens,” there is a growing proportion of analysts who think margins might even fall below that range. But Ericsson’s wireless world is much more competitive than a Cisco wiring closet, and some analysts now think things have nowhere to go but down for the Stockholm-based cellular manufacturer.
There is one little aside to all this. Last year Ericsson Mobile Platforms – the chip division of the company did quite well especially in the 3G chipset market. Much of it was due to growing popularity of cool handsets from Sony Ericsson which use EMP chips. This is going to be a hotly contested arena with Qualcomm getting ready for a rumble.
4 thoughts on “Ericsson’s losing the signal”
The success of EMP(Ericsson Mobile Platforms) in the 3G space has to do largely with the success of LG’s 3G(UMTS) lineup. All of the LG U8xxx series phones use EMP’s WCDMA chipset.
These phones have been runaway success’es for ‘3’ – UK’s first 3G operator.
On the contrary, Sony Ericsson did not acheive much success in the 3G market till the Q4 2004 with the V800.
Karthik – thanks for pointing that out. actually i was alluding to the Q4 which is when SE came into its own. As an aside, LG is moving to some other chip vendor for its 3G requirements it seems
Are you referring to LG’s choice of the Qualcomm (MSM6250 ??)chipset for their 3G offerings?
Actually they put a press release on this one today