Ericsson-Cisco Duo to Build Telecom Cloud Infrastructure

After collaborating to develop modernized IP-based network for Telefonica Guatemala last week, Telefonaktiebolaget LM Ericsson (publ) ERIC and its partner Cisco Systems, Inc. CSCO, have joined hands once again, this time to transform Vodafone Hutchison Australia (VHA)'s networks.

Ericsson and Cisco have been making diligent efforts to build a telecom cloud infrastructure. Boosting the VHA network is indeed a major milestone as it marks Ericsson and Cisco’s most prominent Telecom Cloud infrastructure collaboration. Per the latest deal, Ericsson will be responsible for building the infrastructure, along with ensuring delivery of an end-to-end operational system.

Transformation and virtualization of Hutchison Australia (VHA)’s networks will enable it adapt to new services and improve its agility and programmability from “network slicing”. Eventually, this will help the company introduce fresh applications, improve customer engagement and slash operational and capital expenditure. Further, Vodafone can gain access to new markets, including the Internet of Things, with this revamped infrastructure.

The Ericsson-Cisco collaboration has been shaping up well, even since its inception in Nov 2015, with the two communication technology behemoths jointly bagging more than 60 deals in IP (routing and transport) and services. The duo has extended its routing, data center, networking, cloud, mobility, management and control, and global services capabilities to clients across the globe.

At present, they enjoy 250 active customer engagements and remain optimistic that these will lead to lucrative award wins, moving ahead. After declaring deals with Vodafone Portugal, Aster Dominican Republic and Cable & Wireless in 2016, the Ericsson-Cisco team has also been cleared by the Brazilian regulatory authorities quite recently.

Despite forging strategic partnerships and having a dominant presence in high-traffic LTE markets, Ericsson had a disastrous run on the bourse in 2016. The company’s shares registered a plunge of 21.5%, over the past six months, comparing unfavorably to the Zacks classified Wireless Equipment industry's average positive return of 7.4%. Soft mobile broadband demand, sluggish emerging markets and weaker-than-expected benefits from cost-cutting initiatives hampered the company’s performance significantly.

With three back-to-back earnings misses, over the trailing four quarters, Ericsson witnessed an unimpressive average negative earnings surprise of 23.0%. Currently, analysts are maintaining a neutral stance on the stock as the Zacks Consensus Estimate for 2016 remained unchanged at 33 cents over the past seven days. It will be interesting to see whether this Zacks Rank #4 (Sell) continues with its string of misses or manages a surprise beat in its fourth-quarter 2016 earnings, which is slated to release next week.

Stocks to Consider

Some better-ranked stocks in the same space include Exa Corp. EXA and Harris Corporation HRS. While Exa Corp. flaunts a Zacks Rank #1 (Strong Buy), Harris Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Also, Exa Corp has managed to beat estimates each time, over the trailing four quarters and has an average positive surprise of 68.1%.

Harris Corporation has an impressive earnings surprise history for the trailing four quarters, beating estimates all through, for an average of 4.2%.

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Cisco Systems, Inc. (CSCO): Free Stock Analysis Report
 
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