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Ericsson Wins Media Management Services Contract from BBC

Zacks Equity Research

Telefonaktiebolaget LM Ericsson (publ) ERIC recently announced that it has inked a multi-year contract with BBC, to offer post-production and media management services to the premium public service broadcaster’s in-house creative agency, BBC Creative. Ericsson clinched the contract through a tender process, beating leading post-production companies.

BBC Creative witnessed spectacular growth over the past year, producing content on numerous campaigns across the organization. Leveraging on its proprietary cloud-based media processing platform, Ericsson will deliver end-to-end services — including desktop facilities, edit and audio suites, and storage. The company’s post-production services facility in London — which is well equipped with multiple craft edit, audio and captioning suites — will take care of the BBC’s  content management and delivery needs.

Over time, Ericsson has been taking strategic steps to fortify its foothold in the broadcasting and media industry by extending its technology to broadcasters for merging video and mobility. In the past year, the company has entered into multiple contracts — including Liberty Global’s operating unit, Liberty Global and Belgian telecommunication player, Proximus — to boost their Digital Video Recording services.

Ericsson further partnered with Alphabet Inc. GOOGL to extend the reach of its cloud-based MediaFirst TV Platform into the Android TV ecosystem, Google's operating system for the set-top-box. The company has a proven track record, delivering TV and media business transformation for over two decades. Currently, it distributes 4 million hours of programming in more than 60 languages for over 500 TV channels.

Ericsson’s share price had a disastrous run on the bourse in 2016, as it plunged 39.3%, far wider than the Zacks Wireless Equipment industry’s average negative return of 7.7%. However, since then, the company has managed to recoup some of those losses, having appreciated 15.2% so far in 2017, in stark contrast to the industry’s average decline of 3.0%.

We believe the company’s restructuring actions, including steps to slash cost of sales, efforts to improve supply chain management and service delivery are helping it boost margins. Going forward, this Zacks Rank #3 (Hold) company has plans to prune its TV/Media business to improve profitability. It will be interesting to see whether the company will be able to hold its own position amid tough conditions in the wireless market, which has been on a steady decline.

Please note that brokers are on the sidelines for the stock as its earnings estimates remained unchanged over the month. The Zacks Consensus Estimate remained unchanged at 30 cents over the same time frame.

Stocks to Consider

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

Motorola has a striking earnings surprise history for the trailing 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 trailing four quarters. It has an average positive surprise of 14.3%.

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