Ericsson (ERIC) to Modernize Deutsche Telekom Infrastructure

Ericsson ERIC has been selected by Deutsche Telekom to modernize its mobile network with 5G-ready multi-standard solutions in Germany. Ericsson is scheduled to supply Deutsche Telekom’s current and future network in one of two market areas of the company in Germany.

Deutsche Telekom's 2G, 3G and 4G network with a multi-standard solution will be modernized by Ericsson. The modernized network will offer an improved network performance experience to the company’s subscribers. The five-year agreement will see Ericsson deliver a multi-standard Radio Access Network, founded on the company's Baseband 6630 product and multi-standard radios, Ericsson Network Manager for OSS, & hardware and software support and services. For instance, the OSS for the radio network facilitates unified network management.

Existing Business Scenario

Although the company expects to stabilize IT and cloud product portfolio, along with re-establishing profitability in managed services, it is grappling with negative industry trends and a declining wireless equipment market. Further, the company expects an increasingly challenging investment environment in Europe and Latin America. Notably, the stock has lost 6% in the past six months in contrast to the industry’s growth of 2.4%.

Soft mobile broadband demand and challenging macroeconomic conditions in the emerging markets are acting as a deterrent for major investments by telecom equipment behemoths, and this significantly dented performance. The company anticipates a drop of 8% in the market for radio access networks this year, which is worse than previously expected.

Persistent low investments in mobile broadband in certain markets and lower managed services sales have impacted the sales of Networks segment, while lower legacy product sales have hurt IT & Cloud revenues. Overall, the company expects the negative industry trends and business mix in mobile broadband to prevail this year as well.

This apart, the Zacks Rank #5 (Strong Sell) company functions in an extremely competitive environment, which comprises various big multinational wireless telecom service providers as well as newly established companies.

Stocks to Consider

Some better-ranked stocks from the same space include Analog Devices, Inc. ADI, Adobe Systems Incorporated ADBE and AMTEK, Inc. AME. While Analog Devices sports a Zacks Rank #1 (Strong Buy), Adobe Systems and AMTEK carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Analog Devices has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 16.3%.

Adobe Systems has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 7.8%.

AMTEK has outpaced estimates thrice in the preceding four quarters, with an average earnings surprise of 4.1%.

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