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Ericsson (ERIC) Conducts First 5G Demonstration in Indonesia

Zacks Equity Research

Ericsson ERIC finished the first 5G demonstration in Indonesia, which included a 5G test bed and 5G New Radio. The demonstration, which achieved a peak downlink speed of 5.74 Gbps and latency as low as 3 ms, also included use cases such as a motion-sensing robotic arm, and live 4K video streaming.

The low latency and high reliability of 5G, together with intelligence residing in the cloud, will facilitate enhanced human-to-machine communication. This could have applications in remote surgery, road accident management and situations where humans might be unsafe.

Ericsson also showcased the ability of 5G to support 4K video streaming. Per the demonstration, 5G radio enabled a single network cell to support playback of 4K video by hundreds of simultaneous users. This technology will help cater to the ever-increasing consumer demand in Indonesia, where over 20% of smartphone users access online video daily.

Ericsson's 5G test bed covers all functionality needed for pre-commercial trials and support for features like beam forming and tracking, multi-site transmission, multi-user MIMO, ultra-lean design and dynamic TDD.

Per Ericsson, 5G has the potential to drive 34% revenue growth in 2026 (compared with 2016), for operators. For consumers, it will bring new applications like augmented reality and 4K video streaming, whereas industries will likely benefit from innovative IoT applications like smart transport and remote healthcare.

Ericsson’s demonstrations also included innovations in the areas of radio system evolution, industrialized cloud, connected industries and digital business solutions.

Touted as the next generation of mobile technology, 5G achieved rapid momentum over the past year. Ericsson remains the first industry player to market with combined core and radio for 5G use cases, spearheading the 5G revolution.

The company continues to aggressively drive progress in 5G technology and is engaged in multiple trial engagements with different operators across the world.

However, when it comes to performance on the bourse, 2016 was a tough year for Ericsson — a year in which the company stunned investors with a massive profit warning. Its share price plunged 39.3% over the year, far wider than the Zacks Wireless Equipment industry’s average decline of 7.7%.

Since then, the company has managed to recoup some of those losses, having appreciated 14% so far in 2017, in stark contrast to the industry’s average decline of 2.1%.

Last week, Ericsson revealed a comprehensive restructuring plan to cut costs and streamline its focus areas, as well as explore options for the company’s media business.The company expects to take provisions, write-downs and restructuring charges this year, with most of them being booked in the first quarter. (Read more: Ericsson Revamp: Write-downs, Restructuring Charges to Hit Q1)

Whether these steps will enable Ericsson to jump back on the growth track, remains to be seen. However, as of now, we have a Zacks Rank #4 (Sell) on the stock, as we are apprehensive over the impact of the restructuring on the company’s profits and share price in the near term.

The stock has also attracted some negative analyst attention, of late. Over the past month, analysts have become somewhat bearish on the stock, with estimates moving south. With one downward revision compared with none upward in the past 30 days, the Zacks Consensus Estimate for fiscal 2017 has declined 6.5% to 29 cents.

Ericsson Price and Consensus

Ericsson Price and Consensus | Ericsson Quote

Stocks to Consider

Some better-ranked stocks in the same space includeSierra Wireless, Inc. SWIR, Motorola Solutions, Inc. MSI and Ubiquiti Networks, Inc. UBNT. While Sierra Wireless sports a Zacks Rank #1 (Strong Buy), Motorola and Ubiquiti both hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sierra Wireless has an outstanding average positive earnings surprise of 179.6% for the trailing four quarters, thanks to three huge earnings beats.

Motorola has a striking earnings surprise history for the last four quarters, having beaten estimates all through, for an impressive average beat of 16.4%.

Ubiquiti Networks managed to beat earnings estimates thrice over the past four quarters. It has an average positive surprise of 14.3%.

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