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Ericsson Launches Network Services Suite for Commercial IoT

Ericsson ERIC recently rolled out a broad range of radio network services to aid operators in taking up Internet of Things (“IoT”) applications on their networks. The company believes deployment of commercial IoT networks is picking up pace and its latest services will help in making the most of the trend.

Despite these developments, the shares of the company inched up 1.5% to $7.46 at the close of trading hours yesterday. It appears that investors are apprehensive that the challenging times will linger, marring the company’s second-quarter 2017 results, which are slated to release next week.

Network Services for IoT

Ericsson has launched a set of IoT software features, including Voice over LTE support for Cat-M1. These will help users explore new use cases for voice in IoT, including security alarm panels, remote first-aid kits and wearables. Ericsson’s suite of network services complements its cellular IoT software and Accelerator portfolio.

Ericsson’s offerings are capable of taking care of scenario assessment, network modeling and design development of heterogeneous IoT networks currently used by operators. In addition, the company is introducing automated machine learning to its Network Operations Centers. It believes machine learning will help operators slash delivery cost and take a proactive approach to event and incident management.

Ericsson’s latest Mobility report suggests IoT devices will exceed mobile phones as the largest category of connected devices by 2018. It also predicts that by 2022, there will be over 18 billion connected IoT devices. According to Ericsson, proliferation of IoT devices calls for superior approach to network planning and design. The company believes it is well poised to address these needs.

Challenging Times

Ericsson’s shares have lost 4.6% over the past one year against the Zacks categorized Wireless Equipment industry’s average gain of 7.6%. The consensus analyst community is not favoring the stock either. The Zacks Consensus Estimate for full-year 2017 earnings has gone down from 29 cents to 27 cents due to two downward estimate revisions versus zero upward.

Over the past couple of years, Ericsson has been struggling with a host of factors. Most of the company’s troubles stem from drying-up investments from major telecom equipment makers across the world. These companies continue to slash investments in 4G and 3G services while waiting for the introduction of 5G networks. In addition, slowdown in spending by wireless carriers is making matters worse.

Apart from grappling with a slowdown, Ericsson also has to face sky-rocketing restructuring expenses in its continued efforts to turn around its fortunes. In Mar 2017, the company rolled out an elaborate version of this restructuring plan in a bid to contain costs and focus on strategic areas. The Zacks Rank #5 (Strong Sell) company has warned investors against huge profit cuts resulting from substantial provisions, write-downs and restructuring charges relating to these efforts.

Key Picks

Some top-ranked stocks in the industry are listed below:

Broadcom Limited AVGO has an average earnings surprise of 6.7%, beating estimates all through, over the trailing four quarters. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Optoelectronics, Inc. AAOI delivered an average positive earnings surprise of 118.3% for the trailing four quarters, beating estimates all through. It sports a Zacks Rank #2 (Buy).

Adobe Systems Incorporated ADBE holds a Zacks Rank #2 (Buy) and generated an average earnings surprise of 8.1% over the trailing four quarters, with beats each time.

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