Ericsson AB, the world’s largest maker of wireless phone networks, set a new mid-term sales-growth target that’s 2 percentage points lower than the current range as telecommunications companies limit spending.
The company has a target of 2 percent to 8 percent compound annual sales growth through 2014 compared with 2011, Stockholm-based Ericsson said in the executive-stock plan published in the agenda for its May 3 annual shareholders meeting. Last year’s target was 4 percent to 10 percent growth through 2013.
Ericsson’s revenue increased 12 percent last year to 227 billion kronor ($33.6 billion), buoyed by mobile operators’ broadband investments to cope with the exploding number of smartphone users. This year’s growth may slow to 4 percent, according to the average of 32 analyst estimates compiled by Bloomberg. Operators will hold back on spending in the short term, Chief Executive Officer Hans Vestberg said in January.
“Last year, growth was strong so it is probably unreasonable to expect the company to maintain its three-year growth target,” said Mats Nystroem, a Stockholm-based analyst at SEB Enskilda. “This year is more challenging, and we can’t rule out that the future beyond 2012 could also be slightly negative.”
Ericsson declined 1.8 percent to 66.35 kronor as of 3:11 p.m. in Stockholm. The company retained a target of 5 percent to 15 percent growth in operating profit and a plan for cash conversion of at least 70 percent annually.
Equipment Market Contracts
The market for radio base stations and related equipment contracted 8 percent in the fourth quarter of 2011 after growing in the first nine months to produce a 15 percent expansion rate for the year, said Stefan Pongratz, an analyst at Dell’Oro Group.
“While there are signs that operators in various regions slowed down investments, the product mix played a significant role in the fourth quarter,” Pongratz said by e-mail.
North American carriers spent less on older mobile broadband networks using the CDMA standard as they shifted to newer so-called fourth-generation networks, Ericsson said in January.
Ericsson’s share of radio equipment increased to 37.9 percent from 33.5 percent in 2010, Pongratz said. Huawei Technologies Co. was the second-largest vendor with a 20.8 percent market share, followed by Nokia Siemens Networks at 19.1 percent.