LM Ericsson Telephone Company (NASDAQ: ERIC) turned in even weaker earnings than what many say should have been expected. Its fourth quarter earnings should have been of little surprise when you consider how weak Europe has been and how weak telecom and networking equipment spending has been in the last month. A 1% sales gain in the quarter brought on margins being cut from 36.6% a year earlier down to 30.2% in this fourth quarter report. Unlike elsewhere, the Ericsson news doesn’t give any high hopes for a snap-back recovery. The news is dragging Alcatel-Lucent SA (NYSE: ALU) down as well ahead of its earnings report due in February.
Ericsson hit a 52-week low in ADR terms as the prior range of $8.83 to $15.44 will now be $8,58 to $15.44 after today. The ADR is trading down a whopping 15.7% at $8.62 in New York trading today.
Alcatel-Lucent had seen a rally in its ADRs from $1.56 at the end of 2011 up to $2.01 just as recently as this Monday. Alcatel-Lucent ADRs were hit on Tuesday down to a level of$1.94, but today’s drop of 7.2% takes the ADRs down to $1.80. This is not a 52-week low but it sure feels like it.
Many can argue that this is the worst case and that all of the bad news is priced in. The other side of that argument is that these are money-losers competing with much more formidable competition. Cisco Systems, Inc. (NASDAQ: CSCO) has been trying to take back lost business after its restructuring.
JON C. OGG
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