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Mon, Jul 26, 2004 - Page 12 News List

Ericsson and Nokia provide investors with real contrast


As once high-flying mobile marvel Nokia's slumping sales continue to take their toll on the company's own shares, tech stocks in general and even on the Finnish economy, Ericsson in neighboring Sweden is offering investors a turnaround story of Cindarella proportions.

Just a week after Nokia reported a 5 percent drop in sales and a weak forecast, sending tech stocks skidding and prompting economists to worry that the mobile phone giant played too dominant a role in the Finnish economy, Ericsson announced a forecast-busting second quarter, pulling stocks back up and giving rise to optimism about more jobs and a stronger Swedish economy.

"Nokia has been really a big disappointment, while Ericsson has been really successful ... It has been massively outperforming Nokia's share," Mika Metsalae, a Helsinki-based telecom analyst with brokerage firm Kaupthing Sofi, told reporters.

In the past year alone Ericsson has seen its market capitalization skyrocket to 350 billion kronor (US$46.7 billion) from about 160 billion kronor.

In contrast, its Finnish rival's market capitalization has shed the equivalent of about 250 billion Swedish kronor, dropping from 690 billion kroner a year ago to 440 billion kronor at closing on Wednesday.

While the neighboring goliaths largely pursue different parts of the mobile market, with Nokia concentrating on phones and Ericsson focusing on networks, there is more to their contrasting fortunes than differing external factors.

In fact, analysts credit Ericsson, which only recently exited 10 consecutive quarters in the red, with having taken advantage of a market upswing to turn a sour situation into a booming success. At the same time they chide Nokia for letting huge opportunities lay fallow.

"Ericsson has concentrated on bringing down costs and increasing sales. It's the double-barrelled effect of those efforts that brought such strong results," Haakon Wranne, an analyst with Fischer Partners in Stockholm, said.

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