Ericsson sees weak 4Q sales, shares slide

NEW YORK — Telecom equipment maker Ericsson on Tuesday (Nov. 20) predicted a weak fourth quarter due to tightening U.S. and European demand and unrest in emerging markets, sending its shares down 11 percent.

After issuing a profit warning in the third quarter, the world's biggest maker of mobile-network gear said that sales and margins for the fourth quarter would be at the lower end of a forecast range it had given as recently as last month.

Analysts and investors said they were concerned about the company's ability to monitor the performance of its business and were disappointed Ericsson did not give a clear sign when it would start to see improvements.

"It's not good news," said Leo Schmidt, an equities analyst at insurer Chubb Corp, which owns Ericsson shares. He said investors were spooked by the repeatedly revised forecasts.

"That makes people wonder how much management has control of the business," he said.

Ericsson had said in October that fourth-quarter sales would be between 53 billion and 60 billion Swedish crowns ($8.4 billion to $9.6 billion) and that operating margins would be in the mid-teen percentage range.

Chief Executive Carl-Henric Svanberg told investors that it had since become clear that Ericsson would be hurt by tightening network equipment demand in the United States and Europe, a weakening U.S. dollar and political unrest in some markets such as Pakistan, Bangladesh and Thailand.

"We can see that the U.S. and we can see that Europe is tightening," he said. "There are operators that are clearly downgrading their investments for 2008."

Ericsson said it expected a slight decline in business from networks in Europe where operators involved in mergers and acquisitions are slowing spending on upgrades for high-speed wireless data services such as Web surfing.

"We just assume that we'll have continued disruptions from consolidation," Svanberg said. "We do not think for at least the next year that we will have any major (data) upgrades."

He said that tightening U.S. spending could relate to general economic concerns among operators.

Shares in the Sweden-based company tumbled 11 percent to close at 16 crowns in Stockholm, having fallen as low as 15.92, their lowest since February 2004. Its U.S.-listed shares finished down $3.42, or 12 percent, at $25.11.

MARGINS UNDER PRESSURE

Asked whether Ericsson's board still supported management given Tuesday's news, Svanberg said: "I must say we have in this situation very strong support and good cooperation with the board, so there's no change there."

Ericsson is focused on winning share in emerging markets, where it sees the biggest growth opportunities.

"Whatever you lose in market share you will not regain. Time is of an importance here," he said.

But the comments led at least one analyst to question whether this strategy would put pressure on future profits.

Ericsson's biggest competitors include Nokia Siemens, a venture of Nokia Oyj and Siemens, China's Huawei Technologies Co and Alcatel-Lucent, which had also issued profit warnings this year.

Chief Financial Officer Hans Vestberg told investors he expected wireless network building projects to weigh on Ericsson's margins for the next several quarters. Such projects can take six to nine months, or even up to 12 months, he said.

Svanberg said that "in a perfect world" margins could improve in the second half of next year as the company starts new projects, but his reluctance to commit to a timeframe for improvements worried some analysts.

"It raised more questions than it provided answers," said RBC Capital analyst Mark Sue. "People are still trying to figure out where things might settle."

The double-digit percentage drop in the shares on Tuesday followed a plunge of 30 percent when Ericsson shocked the market with its third-quarter warning. It said it was receiving a greater share of sales from costly network projects and less than it had expected from more lucrative network upgrades.

Within days of the warning, Ericsson replaced CFO Karl-Henrik Sundstrom with Vestberg. It also promised to improve its ability to monitor business conditions and avoid such market shocks in future. (Additional writing and reporting by Adam Cox and Jerker Hellstrom in Stockholm: Editing by David Holmes, Paul Bolding; Editing by Gary Hill)

By: Sinead Carew

Samsung Using Skyworks Products For Femtocell Applications

Woburn, MA -- Skyworks Solutions, Inc. announced that Samsung is leveraging multiple solutions from its Linear Products portfolio including transceivers, power amplifiers and LNAs for use in FEMTO cell applications. FEMTO cells, or small cellular base stations designed for residential and small business environments, help provide enhanced coverage in wireless networks and solve very real, near-term signal coverage and capacity issues. According to In-Stat, worldwide FEMTO cell subscriptions (installed devices) are expected to grow to 40 million by 2011 and surpass 100 million end-users over the next five years, representing a market opportunity for FEMTO cell devices of over $4 billion.

"Skyworks is uniquely suited to support the demanding system requirements of FEMTO cells given our technology breadth and depth," said Stan Swearingen, Skyworks' vice president and general manager of Linear Products. "In fact, the architecture being utilized for Samsung's FEMTO cell systems is an example of our ability to leverage proven and innovative technology across diverse markets."

Products entering volume production include, among others, the:

• SKY74068: highly integrated transmitter for dual-band CDMA applications operating in cellular CDMA, AMPS, and PCS modes. The only external components needed for operation are bias resistors, bypass capacitors, and passives for the PLL loop filter.

• SKY74092: a highly integrated CDMA/PCS LNA for dual-band and tri-mode. The device provides low noise amplification with high linearity to achieve a high dynamic range. Up to four gain steps of low noise amplification are supported through a three-wire read/write serial bus interface.

• SKY74100: a highly integrated receiver for tri-band CDMA applications with GPS capability.

• SKY77410: a load insensitive power amplifier (LIPA(TM)) module for WCDMA applications that meets stringent spectral linearity requirements with high power added efficiency for power output of up to 27.5 dBm, even with a load mismatch of 4:1 VSWR -- eliminating the need for an isolator.

SOURCE: Skyworks Solutions, Inc.

Nokia Siemens May Lose Indian GSM Contract to Ericsson

Local reports are suggesting that Ericsson could win the entire GSM network tender from India's BSNL as Nokia Siemens Networks (NSN) has not yet formally agreed to the terms from the company. The company had planned to split the 22.75 million GSM lines contract 60:40 between Ericsson and NSN. Ericsson's current allocation is worth around US$1.3 billion while NSN's is worth around US$954 million.

Nokia Siemens did originally tender at a higher cost than Ericsson, hence the smaller share of the tender - but is required to match Ericsson's price if it wants to take up the contract.

An unnamed BSNL executive told The Economic Times that if NSN failed to pick up the purchase orders within the next couple of days, another option would be to float a fresh tender.

When asked if BSNL would award the entire contract to Ericsson, BSNL chairman and managing director Kuldeep Goyal told the newspaper "I hope they (NSN) come around. However, if they do not agree, then we will have to explore other options".

BSNL's tender has been mired in controversy ever since it was sent for RFP last year. Initially the tender was for a massive 45 million lines, but the government blocked this and it was shrunk to just under 23 million lines. Then arguments with Motorola who claimed to have bid lower than Ericsson for the tender, but was disqualified from competing on technical grounds.

Under the terms of the final award, Ericsson bid the lowest figure - reported to be about US$91 per line. Nokia - prior to the infrastructure merger with Siemens had bid around US$177, with a significantly higher figure reported from Siemens. The merged company may be having difficulty in pulling down its costs to the level offered by Ericsson.

Andrew and Nokia Siemens Networks Revamp Filter Relationship

WESTCHESTER, IL, October 24, 2007—Andrew Corporation and Nokia Siemens Networks have agreed to revise their long-standing relationship in custom filter production. The agreement provides more design and manufacturing control to Nokia Siemens Networks, supported by Andrew’s research and development expertise, as it readies to market its next generation radio frequency filter products.

Under the agreement, Nokia Siemens Networks acquired the rights to all Andrew intellectual property related to Nokia Siemens Networks’ filter products for wireless networks. In addition, certain Andrew personnel in Italy will continue to provide engineering and technical work exclusively for the Nokia Siemens Networks products under an engineering services arrangement.

The companies also have agreed to rearrange their filter manufacturing relationship, including use of contract manufacturing partners. Nokia Siemens Networks assumes responsibility for the production of its own filter products currently done at an Andrew facility in Shenzhen, China, and by contract manufacturers in Eastern Europe. This arrangement also includes the transfer of production assets and inventories associated with Nokia Siemens Networks manufacturing operations. Andrew retains ownership of the cost-efficient, world-class Shenzhen facility and will expand filter production there on behalf of its other customers.

The transaction enables Andrew to increase its direct-to-operator channel focus while retaining a strong relationship with Nokia Siemens Networks, as well as other key original equipment manufacturers, which includes the supply of various other products and systems for wireless networks around the world.

“We are pleased that this agreement meets the needs of both companies, while continuing the strong supplier relationship we have enjoyed with Nokia Siemens Networks for many years,” said Mickey Miller, executive vice president and group president, Wireless Network Solutions, Andrew Corporation. “These moves will build a foundation for improved profitability and new opportunities for research and development services for Andrew. In addition, we are able to concentrate more resources and management time on areas of the business that offer more profitable growth opportunities.”

Andrew, Resilience Capital Reach Agreement On Sale Of Satellite Communications Business

1/6/2007 Westchester, IL -- Andrew Corporation has reached agreement for the sale of its Satellite Communications business to Resilience Capital Partners, a Cleveland, Ohio-based private equity firm.

Under the agreement, Andrew will receive up to $39 million in total potential cash consideration, in addition to an ownership stake in the new satellite communications company that Resilience will establish with the acquired Andrew assets. Andrew’s ownership stake will be from 17 percent to 20 percent depending on the newly-formed company’s capital structure at closing, which has not yet been finalized.

Andrew will receive $9 million in cash at closing, which is expected to occur prior to the end of calendar 2007, and $5 million in seller’s notes that will mature three years after closing. In addition, Andrew may receive up to an additional $25 million in cash after three years based upon the achievement of certain financial targets by the new company. Dependent upon the ownership stake received and the book value of the Satellite Communications assets at the date of closing, Andrew expects to record a charge against earnings of approximately $15 million to $20 million related to the sale of this underperforming Andrew business.

“We believe the Satellite Communications business and its people will have a brighter future and greater prospects for success as a standalone company with a singular focus of meeting the needs of its worldwide customers,” said Jude Panetta, group president, Satellite Communications, Andrew Corporation. “We worked extensively over the last two years to move away from unprofitable businesses and markets and, through innovative product development, to enter new and more profitable markets such as military satellite communications, electronics and mobile platforms. We are pleased with this agreement, and are optimistic that the Satellite Communications business will achieve its full potential as a standalone business under the guidance of Resilience Capital.”

”We at Resilience are confident that, when given the opportunity to be decoupled from Andrew, this business and its people will find itself to be an even more significant integrated systems supplier in its marketplace and to its customers,” said Bassem Mansour, managing partner, Resilience Capital Partners.

With sales of approximately $104 million in fiscal 2007, Satellite Communications comprises nearly five percent of Andrew’s overall revenues. The unit employs approximately 520 people in nine countries. Other than Reynosa, Mexico-based employees, who will be transitioned into other Andrew businesses over time, it is expected that all existing employees of Satellite Communications will transfer to or get offers to join the new company, named ASC Signal Corporation, upon completion of the acquisition.

Andrew also will provide certain support services to the new Satellite Communications company and Resilience during a transition period in order to ensure a seamless transfer of ownership that minimizes any risk of disruption to customers, employees and suppliers. “Both Andrew and Resilience are committed to supporting the continuation of Satellite Communications’ strong heritage of delivering innovative, high-quality products and outstanding service to its customers around the world,” Panetta said.

Andrew’s Satellite Communications Group provides a complete line of antennas from 46 centimeters to 9.4 meters and radio frequency electronics for all enterprise, government/military, and consumer satellite communications applications. Andrew-designed and -built products—which cover C, Ku, K, X, and the emerging Ka band—include approved earth station antenna hubs and gateways for broadband and broadcast, VSAT broadband antennas and transceivers for consumer and enterprise customers, direct-to-home antennas and LNBFs for home satellite broadcast systems, high frequency and air traffic control radar antennas for governments, and complete installation and testing services.

Motorola tests 3G femtocell technology in Europe

Motorola on Monday announced that it has completed the testing of its 3G femtocell technology and has moved on to a trial with a major European carrier.

The femtocell technology being trailed is based on open standards and includes customer premises equipment, 3G devices, a core network concentrator, systems integration services, and Motorola's customer premises equipment management software, called Netopia Broadband Server.

Motorola didn't disclose the name of the European carrier that is testing its femtocell technology.

Femtocells are small base stations designed for use in homes and offices to help spread cellular coverage inside buildings. They will attract more than 100 million users in the next five years, according to ABI Research.

Consumers benefit from the technology by being able to keep a phone call or an Internet session going as they transition from wireless networks inside their homes to outside networks. The switch is seamless when they use their 3G-enabled mobile devices, according to Motorola.

Potentially, the use of femtocells can improve indoor wireless coverage and help reduce "in-home" call charges on mobile devices.

Motorola is part of the Femto Forum, a nonprofit organization founded in 2007 to promote the deployment of femtocells worldwide.

Earlier this year, U.S. wireless carrier Sprint launched a trial in Denver and Indianapolis to test femtocell hardware and service called Airave, which is designed to provide subscribers with enhanced cellular coverage in their homes and home offices. The technology works similarly to T-Mobile's HotSpot @Home service. However, instead of using Wi-Fi to extend coverage, Airave uses femtocells.

Carriers are expected to install femtocells to make their networks more efficient and to provide better cellular coverage indoors. Traffic will be routed using the Internet Protocol, which means carriers will be able to offer additional services like voice over IP and IPTV to their subscribers.

Alcatel-Lucent posts loss, deepens job cuts

Alcatel-Lucent SA, the world's largest telecommunications-equipment company, on Wednesday said it will cut a further 4,000 jobs and replace its chief financial officer as part of a turnaround plan unveiled as it posted its third straight quarterly loss.

The additional job cuts bring total workforce reductions to 16,500 and will help save an extra 400 million euros ($577 million) by the end of 2009. Jean-Pascal Beaufret, the group's CFO, is stepping down to "pursue other opportunities" and will be replaced by the current head of the enterprise division, Hubert de Pesquidoux.

The moves announced Wednesday are part of a much anticipated turnaround plan requested by the board and signal Alcatel-Lucent's determination to accelerate its restructuring. But the initiatives received mixed reviews from analysts who had called for much larger job cuts and for the sale of parts of the company's portfolio.

News of the reorganization came as the gear maker posted an adjusted net loss of 258 million euros, or 0.11 euros a share, in the third quarter. It earned 532 million euros, or 0.23 euros a share, a year earlier. An exact comparison with last year's third-quarter results can't be made as the two companies had not yet merged.

Revenue fell 11% year-over-year to 4.35 billion euros. However, it rose 2% sequentially. The average forecast of eight analysts polled by Dow Jones Newswires was for a net loss of 223 million euros and sales of 4.4 billion euros. Gross margin improved to 34.2% from 33.4% in the second quarter.

Turning to the fourth quarter, the group said it expects a "solid ramp up" in revenue from the third quarter. It also said revenue would be flat this year, updating an earlier prediction that sales would be unchanged to slightly up.

The company confirmed it's on track to achieve pre-tax cost savings of 600 million euros this year.

Alcatel-Lucent shares, in New York trading, rose 22 cents to $9.61. See Europe Markets.

Some slowdown in North American spending

Alcatel-Lucent shares have lost roughly 40% so far this year. The company, created from the merger of France's Alcatel and Lucent Technologies of the U.S., has struggled to bring about the promised scale benefits and to become a more formidable competitor to Sweden's Ericsson
and aggressive Chinese vendors such as ZTE Corp.

Alcatel-Lucent has issued three profit warnings since its merger in December 2006.

But its competitors haven't been immune to operational hiccups either.

A profit warning from rival Ericsson earlier this month sent its shares down roughly 25% in a single day and cast doubt on the level of demand for mobile-network upgrades, particularly from North America. See archived story.

Alcatel-Lucent Chief Executive Patricia Russo on Wednesday said market conditions remain difficult, "with continued pressure on revenues and margins due to intensified competition and some slowdown in spending in North America."

Analysts fret over CFO's departure

The news of Beaufret's departure wasn't cheered by analysts.

Richard Windsor of Nomura, who has a neutral rating on Alcatel-Lucent, said the executive is widely regarded as the best CFO in the industry.

His departure, he said, "is a blow upon a bruise" and he warned that the executive's "steady hand and pragmatic approach will be sorely missed at a time when Alcatel-Lucent needs him the most."

ABN Amro analysts also expressed concern at Beaufret's departure, calling the news "a bit worrying" and saying it hurts the credibility of the new financial targets.

Beaufret is the third senior executive to leave the company since the end of the summer.

Regarding the additional 400 million euros of cost savings unveiled Wednesday, Bear Stearns analysts noted that the challenge will be to realize them rather than reinvest them, given current market conditions and the company's growing footprint. The company has been forced to reinvest most of its cost savings to date to remain competitive.

As part of its organizational revamp, Alcatel-Lucent said it has set up a seven-member management committee that will report directly to Russo and replace a group of 21 executives.

The committee will be charged with assuring execution and business performance, creating a "more focused and efficient operating model."

Russo said she selected "every member" of the team, which includes regional and divisional heads.

Turning to individual divisions, revenue rose 5% to 1.52 billion euros at the fixed-line carrier business. It dropped 24% to 1.28 billion euros at the wireless division. The company attributed the decline in wireless sales to strong comparisons in the year-ago quarter.

Russo said in a conference call that the company has no intention of exiting any significant parts of its portfolio of products and will remain both in wireless and wireline.

At the convergence unit, revenue fell 41% to 346 million euros. While it has gained market share in next-generation products, that business is still not big enough to offset the declines in demand for traditional equipment, the company said.

Sales at the enterprise unit rose 5% to 380 million euros.

Russo said Alcatel-Lucent has no intention of selling the division