Ericsson: Credit Suisse Downgrades To Underperform

Credit Suisse analyst Kulbinder Garcha this morning cut his rating on Ericsson (ERIC) to Underperform from Outperform, asserting that the company will have trouble avoiding the impact of a downturn in the wireless infrastructure market. Garcha writes that global spending on wireless infrastructure could drop 12% in 2009, “due to a combination of emerging market slowdown and financing risks at carriers accounting for 25% of global wireless spending.” He also notes that while the company has been gaining share over the last few years, the trend may not continue, given the loss of market share in China and “a more disciplined pricing strategy.” Garcha adds that due to a combination of currency losses, negative leverage due to lower revenue and losses at Sony Ericsson given deteriorating handset demand, the company’s operating margin is likely to drop from an estimated 10.8% this year to 8.6% next year. He adds that “further restructuring actions may be ... (link)