Salomon Pares Ericsson Rating

Analyst Thomas Robillard said higher 3G-related costs could drain profit

Salomon Smith Barney downgraded Ericsson's (ERICY ) rating to neutral from outperform.

Analyst Thomas Robillard said he sees even higher than forecasted research and development, and selling, general and administrative costs related to the implementation of 3G-related technology. He sees ongoing handset issues, and thinks the global telecommunications provider's goal of second-half profitability is aggressive. Robillard still believes Ericsson is extremely well positioned to lead in 3G, but he thinks the company's near-term financial impact from 3G effectively reduces the outlook for its crown jewel: mobile infrastructure. He thinks the stock is expensive based on poor 3G and handset-market visibility. He cut his $0.27 2001 EPS estimate to $0.17, and cut his $15 stock-price target to $10.

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