Ericsson Seeks to Enhance Mobile Transport Solutions for 5G

Ericsson ERIC is working to enhance its mobile transport solutions by adding key transport technologies from Juniper Networks, Inc. JNPR and ECI Telecom. The company is expanding collaboration with Juniper Networks to boost its 5G transport portfolio. For instance, Juniper's edge and core solutions will complement Ericsson's Router 6000 product family. This will offer smooth and continuous connectivity from radio cell site to core, thus improving quality, performance as well as ease-of-use of 5G system. Also, Juniper's security products will help Ericsson in securing its customers' mobile networks.

Ericsson is forming another collaboration with ECI to complement its optical transport offering for metro. The collaboration will enable Ericsson to provide latest-enhanced optical transport solutions for critical infrastructure customers and service providers.

As a matter of fact, Juniper’s and ECI’s transport solutions are interoperable with the company’s transport portfolio. Notably, Ericsson’s management and orchestration solution will manage the transport solutions from Juniper and ECI, simplifying the management of 5G across the transport, radio as well as core network. Also, the company is adding latest hardware and software products to the Ericsson Radio System portfolio, thus expanding its 5G Platform. These include the launch of RAN Compute portfolio and Ericsson Spectrum Sharing software.

Our Take

Of late, Ericsson is focusing on 5G system development and has undertaken many notable endeavors to position itself as a market leader in the technology. The company believes that standardization of 5G is the cornerstone for digitization of industries and broadband. The Ericsson Mobility report suggests almost 90% of smartphone subscriptions, which are on 3G and 4G networks today, will be upgraded to 5G networks when it becomes commercially available in 2020. 5G will accelerate the digital transformation in many industries, enabling new use cases in areas such as IoT, automation, transport and big data.

The Zacks Rank #3 (Hold) company is accelerating planned cost cuts and efficiency measures, and its focus on core business of selling networking equipment prior to the expected roll-out of 5G networks. The will help generate lasting efficiency gains and boost cost competitiveness.

In the past six months, shares of Ericsson have gained 26.2% compared with 9.9% growth for the industry.

However, the company continues to struggle with challenging market conditions and all-pervasive demand weakness. Persistent low investments in mobile broadband in certain markets and lower managed services sales have hampered the sales of Networks segment, while lower legacy product sales have hurt IT & Cloud revenues.

Stocks to Consider

Some better-ranked stocks in the same space are Ubiquiti Networks, Inc. UBNT and Clearfield, Inc. CLFD. While Ubiquiti Networks sports a Zacks Rank #1 (Strong Buy), Clearfield carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ubiquiti Networks surpassed estimates thrice in the trailing four quarters with an average positive earnings surprise of 8.96%.

Clearfield exceeded estimates in each of the preceding four quarters with an average positive earnings surprise of 52.78%.

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