Ericsson (ADR) (ERIC), Cisco Systems, Inc. (CSCO): Promising Stocks in the Communication Equipment Industry

The communication equipment industry has started showing signs of recovery after declining for the past five years.

Despite the rising demand for its products and services, the industry is still facing a tough time due to the growing imports from low-cost countries. This trend is decreasing the total revenues of the industry players.

In response, industry players are focusing on acquiring new technologies and managing their product and service lines (Source: IBISWorld). Ericsson (ADR) (NASDAQ:ERIC), the world’s leading provider of telecommunication equipment and services to mobile and fixed network operators, is following a similar approach. This article will analyze how the adoption of this new approach will benefit investors.

Prospects of Ericsson

Ericsson (ADR) (NASDAQ:ERIC) serves over 1,000 networks in more than 180 countries and more than 40% of the world’s mobile traffic passes through Ericsson (ADR) (NASDAQ:ERIC)’s networks.

In its second quarter of 2013, sales were flat with no Year over Year (YoY) change. Sales of network and global services were higher by 1% and 3% respectively but sales from its support solutions decreased by a significant 33%. This decrease is likely to be reduced in the future due to Ericsson (ADR) (NASDAQ:ERIC)’s recent acquisition of TeleOSS Consulting, a Thailand based specialist in consulting and systems integration for Operating Support Systems. This acquisition will complement Ericsson (ADR) (NASDAQ:ERIC)’s services portfolio of systems integration for OSS in South East Asia and Oceania.

This will also help Ericsson (ADR) (NASDAQ:ERIC) in handling inventory management areas and offer a wider range of solutions. It will help in handling communication traffic and ensuring high class service delivery to the end consumers. This will enhance the quality of service provided by Ericsson.

On July 1, 2013 Ericsson also acquired Red Bee Media, the world’s leading service media company. This acquisition will broaden its broadcast services market and expand its capabilities in the TV industry. It will also expand its operations in European and Australian markets. The company is investing in the TV industry because video sharing is currently the single biggest contributor to mobile traffic, which is expected to grow by 60% annually till the end of 2018. The company is currently processing over 50% of the video demand around the world. These acquisitions will help the company in attracting even more customers which will eventually increase its revenues in the future.