Ericsson's Partnerships Against Hardships
Rhodora is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Although Swedish communications technology pioneer Ericsson (NASDAQ: ERIC) did not have the rosiest start for 2013 as Standard and Poors revised its rating from “stable” to “negative” based on the difficulty at which the company could achieve improved profitability for this year, there have been a number of business developments and transactions that disprove this rating.
Aside from these great achievements despite a challenged market, what else makes Ericsson generate stronger returns and market share in an extremely competitive industry?
Expansion Through Acquisitions and Partnerships
While Ericsson completed its takeover of BelAir Networks in April 2012, Calix acquired some of BelAir’s assets in November, along with the initiation of the Calix-Ericsson international reseller agreement. It also entered into a transaction comprising the purchase of numerous patents by software company Unwired Planet Inc, giving Ericsson access to their patent portfolio. The deal includes the transfer of 2,185 international and US applications, and patents towards an increased range of patents of its Internet-based folio, which comprises the transfer of a hundred more assets in the next five years. All of these give Ericsson access to Unwired Planet’s patent portfolio, along with rights to revenue generated by the augmented group.
Ericsson is also looking forward to increasing its workforce base as it acquires France-based communications and information tech consultancy Devoteam Telecom and Media, which has approximately 5,000 employees throughout Africa, Europe, and the Middle East. This is expected to be completed sometime in the second quarter of 2013. Things are also getting better in Saudi Arabia, as Ericsson was given a contract by Middle East telecom Mobily, which plans to expand its 3G and 4G networks within the year to the tune of $150 million.
Benchmarking through Healthy Competition
Carrier spending might not be at its strongest, but Ericsson’s expectations for revenue are relatively low and beatable, especially with its performance and gradual growth throughout 2012. Some of the telecom company’s rivals, however, are not as fortunate.
Finnish mobile device maker Nokia Corporation (NYSE: NOK) reported sales of more than 4 million units of its flagship smartphone Lumia in the last quarter of last year, which was a substantial increase from 2.9 million units from the same quarter in 2011. This may help offset some bad news of plans to cost-cut and in the process lay off about 1,000 workers, which is undoubtedly a sign that things aren’t going that swimmingly for the mobile phone giant, especially as Apple continues to maintain its hold over the mobile device market. Despite the positive signs, Nokia will still cut its per-annum dividend payments for the first time in 2013.
Alcatel Lucent SA (NYSE: ALU) might not be in the same situation as Nokia, but it is very stable and is now recovering from a serious drop during the last quarter of 2012. The future looks a tad brighter for Alcatel, too, with developments such as the $1 billion-dollar extension of its contract with Reliance communications where it aims at improving network services in India for the next seven years, receiving $2.1 billion in aid from Credit Suisse and Goldman Sachs. Alcatel is also in the midst of substantial but gradual growth in the cloud computing market, collaborating with Hewlett-Packard, a collaboration that will undoubtedly benefit both companies in the long run.
Will Ericsson Give In?
The team-up between Unwired Planet and Ericsson is by no means a new one. The inception of mobile Internet was the brainchild between a partnership that began in the late 90's, a partnership that now takes advantage of and enhances the platform of mobile networks and the general experience of consumers with their mobile devices.
The strength of the well-rounded patent portfolio is but another gateway through which Ericsson can significantly boost company revenue, market share, and stock through forthcoming discussions and collaborations with key players in the industry. Because of this effort, investors and shareholders are looking through Ericsson’s progress in a positive note.
RhodoraDagatan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!