Ericsson Clobbered: Down Around 25%

A stock dropping 25% isn't necessarily big news but when it happens to a large-cap with a moderate P/E, it is worth paying attention. In this case, it happens to be Ericsson (ERIC), the largest communications equipment provider in the world.

(source: stockcharts.com)

I don't know much about this company, other than some tidbits when I was looking at companies like Nortel, so I don't know how accurate the numbers in Yahoo Finance are. According to Yahoo Finance, ERIC has a trailing P/E of 11.3 and forward P/E 10.7 (likely to be way off given the recent news), P/Sales of 2.3 and P/Book-Value 3.3, with a a market cap $49.5 billion. Ericsson trades at a lower multiple than most of its competitors, such as Lucent-Alcatel, Nortel, Motorola, and Nokia (not all of these are direct competitors).

All the communications equipment providers are running into headwinds but it's worth watching them. Clearly the capex that some of these technology outfits have been expecting haven't materialized. It remains to be seen if businesses will cut technology capital expenditures further as the economy slows. There is a theory on Wall Street that tech, communications, and related areas, will be spared the brunt of any slowdown due to solid capex by businesses. I'll do more homework on Ericsson in the future...

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