That other Scandinavian telecom firm gets little attention. Stock in Sweden's LM Ericsson Telephone (40, ERIC) hasn't done much in a while, yet that of industry leader
Nokia
of Finland has exploded. Investors are overlooking a sophisticated player with great growth prospects, says
Lehman Brothers
analyst Jeffrey Kvaal.
The world's third-largest telecom equipment maker saw its earnings and net margin impeded by the 2006 acquisition of Britain's ailing Marconi. Also, given its large position in cell phone making (from a joint venture with
Sony
), there has been concern that it might stumble in the ever fickle mobile market. Witness what happened to
Motorola
and the once-hot Razr.
Ericsson
is banking on greater demand for mobile voice and data traffic in Europe to fuel growth. Phone customers are going beyond just text messaging and now want to watch YouTube. Ericsson has the sophisticated networks to do the job. As Marconi shows, the company has been on an acquisition spree, buying small multimedia outfits to boost its messaging capabilities, like making phones ready for videoconferencing.
Through June earnings were up 20% to $1.9 billion, sales up 6% to $13.5 billion.
With a trailing P/E of 15, it is a bit less expensive than Nokia (18) and the overall telecom gear-making industry (19).
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