U.S. Markets closed

Francisco Partners to Buy Stake in Ericsson's iconectiv

Zacks Equity Research

Telefonaktiebolaget LM Ericsson (publ) ERIC procured a minority investment from leading technology investment firm, Francisco Partners, for its iconectiv business.

iconectiv is part of Ericsson’s media segment whichdevelops market-leading solutions that help operators to interconnect networks. Its solutions service over two billion people every day and are used by over 1,200 service providers, regulators, enterprises, and content providers across the world.

iconectiv was built on Telcordia’s assets, a company which Ericsson bought in 2012, and has since developed into an extensive business. Francisco Partners has agreed to invest $200 million, which will represent a stake of 16.7% in iconectiv, implying a valuation of roughly $1.2 billion.The investment is conditional on regulatory approval and is expected to conclude in third-quarter 2017.

The funding from Francisco Partners will allow iconectiv to boost growth and deliver shareholder value.

The $200 million will be transferred as a dividend to Ericsson, which it expects to receive in third-quarter 2017.

After a bearish run for most part of last year, Ericsson’s shares gained some momentum in the last three months, returning 14.8%, in stark contrast to the Zacks categorized Wireless Equipment industry’s decline of 5.6%.

Moreover, the company has also been witnessing some bullish analyst activity on the earnings estimate revision front lately. Over the past month, the company’s Zacks Consensus Estimate for 2017 rose 3.3% to 31 cents.

The company is well positioned to leverage on the consistent convergence across telecom, IT and media sectors, which we are currently seeing. Further, customers are increasingly focusing on making their business more digitalized and this is another trend that will benefit Ericsson.


Ericsson Price, Consensus and EPS Surprise

Ericsson Price, Consensus and EPS Surprise | Ericsson Quote

Stocks to Consider

Ericsson presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader sector include Check Point Software Technologies Ltd. CHKP, Dassault Systemes SA DASTY and Aspen Technology, Inc. AZPN. While Check Point Software and Dassault sport a Zacks Rank #1 (Strong Buy), Aspen Technology carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Check Point Software is a leading provider of policy-based enterprise security and traffic management solutions. The company has a solid earnings surprise history for the trailing four quarters, having beaten estimates thrice, for an average beat of 6%.

Dassault Systemes, a globally recognized leader in CAD/CAM/CAE and PDM II markets, has a striking earnings surprise history for the trailing four quarters, beating estimates all through for an average positive surprise of 11%.

Aspen Technology is a recognized expert and leading provider of award-winning process optimization software and services. The company has beaten estimates consistentlyeach time over the trailing four quarters, with an average positive surprise of 20.3%.

8 Stocks with Huge Profit Potential

Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ericsson (ERIC): Free Stock Analysis Report
Check Point Software Technologies Ltd. (CHKP): Free Stock Analysis Report
Dassault Systemes SA (DASTY): Free Stock Analysis Report
Aspen Technology, Inc. (AZPN): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research