With bigger net incomes and increasing orders, wireless vendors blossomed with more optimism and richer cash flows than a year ago, signaling what industry watchers see as better times ahead.
However, stock-market gains remain modest.
L.M. Ericsson edged out market expectations in its fiscal first-quarter results with net income of $387 million, showing not only the resilience of the infrastructure business, but the company’s strong position as a leader in mobile systems. The net income compares with a loss of $555 million in the year-ago period. Earnings per share totaled 2 cents compared with a loss of 3 cents per share in the same period last year.
“We have clearly strengthened our market position since last summer,” said Carl-Henric Svanberg, president and chief executive officer of Ericsson. “Our year has started well with a number of contracts in key growth areas. A stronger customer focus, including our commitment to operational excellence, is clearly contributing to this achievement.”
The infrastructure provider said orders rose 22 percent from the same period last year, and its adjusted gross margin leaped 44.7 percent. In its mobile networks, Ericsson counted net sales of $2.75 billion, a drop from the $3.2 billion recorded in the prior quarter. The orders, however, increased both sequentially and year over year by 43 percent and 22 percent, respectively, thanks to its GSM and third-generation businesses, according to the company.
“We are a major supplier in close to 50 networks that will be or have been commercially launched by year-end. EDGE plays an important complementary role and continues to grow quickly. Over time we expect most GSM networks to be upgraded with EDGE. In addition, the new Ericsson Expander has been well received as an enabler for communication in rural areas and in developed as well as in high-growth markets,” said Svanberg.
Lucent Technologies Inc. is riding a wave of three consecutive quarters of profits as indicated in its fiscal second-quarter results, with a net income of $68 million, or 2 cents per diluted share. In its wireless business, however, the vendor grappled with a decline in revenue. The company’s net income fell short compared with the first quarter, when the company posted net income of $338 million, or 7 cents per diluted share. In the year-ago period, Lucent suffered a loss of $351 million, or 14 cents per diluted share. The company’s overall revenue fell 9 percent to $2.19 billion, compared with $2.40 billion in the same period last year. Operating expenses also fell 3.9 percent to $623 million.
“At this point, we now expect annual revenues to increase on a percentage basis in the low single digits for the fiscal year,” noted Frank D’Amelio, Lucent chief financial officer. “While we may still see some quarterly fluctuations, we continue to expect to report a profit for the year, excluding any additional impact from a revaluation of the warrants.”
Lucent Mobility revenues for the quarter stood at $951 million, a decrease of 1 percent sequentially and a drop of 13 percent from the same period last year. The company highlighted its CDMA2000 1x EV-DO contract with Verizon Wireless, its rising CDMA 450 MHz profile, as well UMTS activities buoyed by its alliances with Novatel Wireless in PC modem cards in deals with European operators in Italy, Spain and Germany.
“Our Mobility business remained strong,” said Patricia Russo, CEO of the company. The vendor also benefited from rebuilding Iraq’s infrastructure, while listing contracts with companies such as China Unicom, China Telecom, Telefonica and T-Com. She also said professional services enjoyed more traction and cited the benefits to Lucent from increasing bundling of voice, video and data services.
Motorola Inc. announced its first-quarter results to market enthusiasm, generating its best stock momentum in three years. Its shares rose $3.11 to $19.33, representing a 20-percent leap. The vendor reported net earnings of $609 million, or 25 cents per share, in contrast with the same period a year ago when it posted net earnings of $169 million, or 7 cents per share. This represents a 257-percent jump. The company’s sales swung up in its four main business divisions with wireless implications-handsets, infrastructure, semiconductors, and government, commercial and industrial products.
“We are making steady progress in boosting our financial performance and creating value for our stockholders. I also believe these results reflect increasing momentum for our evolving vision of seamless mobility,” said Motorola Chairman and CEO Ed Zander. “Our growing portfolio of products, seamlessly connected, will bring voice, media and data-rich services to people wherever they are: at home, at work, in the auto or out in the world.”
Sales rose 42 percent to $8.6 billion for the quarter, compared with $6 billion in the year-ago period. In its handset division, sales rose 67 percent to $4.1 percent compared with the same period last year. The business counted operating earnings of $398 million, unlike the $114 million it posted in the same period last year. The company attributes the higher earnings to a 51-percent hike in handset shipments, which reached 25.3 million.
In related Motorola handset news, the company said it will license Research In Motion Ltd.’s popular BlackBerry wireless e-mail service on some of Motorola”s mobile phones. The agreement follows a series of similar deals between RIM and other wireless device makers.
In Motorola’s infrastructure division, sales rose 38 percent to $1.3 billion, compared with the year-ago period. Operating earnings were $119 million, compared with $29 million in the same period last year. In its commercial, government and industrial solutions unit, the company posted a sales surge of 18 percent, amounting to $1 billion, compared with the same period last year.
In its semiconductor business, newly named Freescale Semiconductor Inc., the company savored a 21-percent rise in sales compared with the same quarter last year. The company filed a registration statement with the Securities and Exchange Commission to make its chip business a separate publicly traded company.
Qualcomm Inc. soared to high profits in its second-quarter results, emphasizing the prosperity of its CDMA offerings and its place in the industry’s travel to next-generation services. The company basked in a net income of $488 million, representing a 39-percent leap from the previous quarter and a 374-percent jump from the same quarter last year.
Earnings per share stood at 58 cents, amounting to a 35-percent increase from the previous quarter and a 346-percent rise from the year-ago period. “Our financial results reflect the strong acceptance and rapid global growth of 3G CDMA,” said Irwin Jacobs, chairman and CEO of the company.
“Consumers and enterprises increasingly recognize the benefits of CDMA-based networks, with the number of subscribers now exceeding 200 million.”
The CDMA proprietor enjoyed revenues of $1.2 billion for the quarter, a trifle 1-percent edge compared with the first quarter, but a 20-percent improvement from the year-ago period. The company said it shipped about 32 million chips, especially its MSM5100 and MSM5500, around the world.
“We anticipate supply to better align with demand over the course of the next two quarters,” the company said. Qualcomm is enthusiastic about the third quarter, projecting a revenue increase of 4 percent to 7 percent sequentially and 41 percent to 44 percent from the year-ago period, excluding its Qualcomm Strategic Initiative Program. Including that item, it expects revenues to grow about 26 percent to 29 percent from the year-ago period and its EPS to be in the $1.93 to $1.98 range.
