Ericsson Looks to TV, Cloud Software to Fend Off China's Huawei

  • First-quarter revenue growth estimated to have slowed to 2%
  • Expansion beyond phone networks crucial for future growth

Ericsson AB is poised to report slowing first-quarter sales as Chinese rival Huawei Technologies Co. steps up competition with price cuts and new products. To jumpstart growth, the Swedish network-equipment maker is moving into newer areas like cloud software and TV-broadcast services.

Huawei has quickly become the third-biggest supplier of equipment and software powering wireless communications by winning contracts to build and improve networks throughout Asia, Europe and Africa. The increased competition and slowing spending by phone companies in the U.S. and Asia make Ericsson’s pact with Cisco Systems Inc. and its push into TV and cloud software key to boosting sales.

Ericsson’s first-quarter sales probably rose about 2 percent to 54.4 billion kronor ($6.7 billion), the weakest growth in five quarters, while its gross margin expanded to 35.8 percent from 35.4 percent a year earlier, according to the average of estimates compiled by Bloomberg. Phone carriers are spending less to expand and upgrade networks, while Ericsson’s plan to find 9 billion kronor in annual annual cost savings is supporting profitability.

Ericsson is scheduled to report first-quarter earnings Thursday.

The shares have plummeted about 28 percent over the past year, valuing the company at 260 billion kronor. The stock is little changed over the past five years.

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