Summary:
Ericsson reported weak third quarter results, due to reduced business activity in the North American region owing to lower operator investments. Also, higher operating expenses and adverse impact from hedge contracts continued to act as headwinds. Moreover, political unrest in the Middle East and Northern African countries remains a concern. Nevertheless, the company is benefiting from the rising demand of 4G/ LTE technologies in growing regions like China, India and the Middle-East. The recent deal with Reliance for spreading network in India is noteworthy in this respect. In addition, the company has been focusing on increasing its presence in the TV and media segment, where it has completed a few strategic acquisitions. Also, popularity of the company among local operators for enhancing their network coverage in various parts of the world bodes well. Hence, we retain our Neutral recommendation on the stock.

Overview:

Founded in 1876 and headquartered in Stockholm, Sweden, Ericsson is a leading provider of communication networks, telecom services and support solutions. The company is a leader in telecommunications and is now expanding its role into an ICT (Information and Communications Technology) solutions provider. Ericsson has three operating segments:

Networks: The Networks segment delivers products and solutions for mobile access, Internet protocol (IP), and transport and core networks. Its products include radio access solutions IP and transport solutions transmission/backhaul solutions, which include microwave (MINI-LINK) and optical transmission solutions switching and IP multimedia subsystem solutions and operations support systems. The products also support operator's management of existing networks.

Global Services: The Global Services segment delivers managed services, including solutions for designing, building, operating and managing networks or solutions maintenance and network sharing solutions shared solutions and broadcasted and managed services. This segment also offers product-related services comprising services to expand, upgrade, restructure or migrate networks network-rollout services and customer support and network optimization services. Additionally, the segment provides consulting and systems integration services that include technology and operational consulting, integration of multi-vendor equipment, design and integration, and transforming programs and industry specific solutions.

Support Solutions: The Support Solutions segment offers operations and business support systems, enabling networks and services management, and customer interaction and revenue management and television (TV) and media management services that enable operators, broadcasters and content owners to create multiscreen TV and M-commerce software solutions and hosted services.

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