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Ericsson shares rise despite profit below consensus

STOCKHOLM (Reuters) - Mobile telecom gear maker Ericsson posted sales and fourth-quarter operating profit below expectations on Thursday, but shares rose and analysts pointed to a positive outlook for the Swedish company.

Ericsson's earnings before interest and tax were 9.1 billion Swedish crowns ($1.4 billion) compared to 4.8 billion in the year-ago quarter, excluding the company's joint ventures, missing a mean forecast of 9.9 billion in a Reuters poll of analysts.

Sales at the world number one mobile network equipment maker were 67.0 billion crowns against a forecast of 69.3 billion. Sales and profits were boosted by a 4.2 billion crowns patent deal with Samsung.

The gross margin was 37.1 percent against a mean forecast of 36.7 percent. Ericsson proposed a dividend of 3 crowns per share, higher than the median forecast of 2.95 crowns per share.

As of 1010 GMT (5.10 a.m. ET), Ericsson was trading at 79.55 Swedish crowns, up 2.8 percent.

Link to Q4 report: http://hugin.info/1061/R/1757959/594255.pdf

ALEXANDRE PETERC, EXANE BNP PARIBAS

"Generally speaking, expectations were low, probably buy-side consensus below the sell-side consensus.

"They appeared fairly confident on the conference call and I think that's driving the share and underscores the fact that they are still in a margin recovery phase... There is still margin rebuilding going on throughout 2014 so I think that is the main positive for the share."

"I also think that if you take into account the Samsung payment from now onwards, that means that basically over the past three years they have missed that payment, which has made their gross margins look well below competition. While they were under pressure, they would have been one percent higher had they had the Samsung payment. So adding that going forward, that should also generate an increase in estimates."

"Net net it looks like they had a quarter pretty much in line (with expectations) and were reassuring on gross margin going forward."

CREDIT SUISSE

(From Research note)

"As expected, Ericsson noted another 4% yoy FX headwind on top-line in Q4. NA revenues were weak at SKr13.8bn as the company continues to highlight peaking of 2 mobile broadband coverage projects in the US (we think Sprint and T-Mobile), and we believe this trend may continue into 1H14 given tough yoy comps. Europe and Central Asia continued to show signs of recovery, which should accelerate given the impact from VOD's Project Spring from Q214."

"Our thesis on GMs remains intact that GMs can improve from 33.5% in 2013 to close to 35% by 2015 driven by mix shift towards capacity. In addition, we also believe that the recent Samsung patent settlement can provide around 100bp of uplift to GMs going forward, as we expect SKr2.5bn of ongoing royalties in 2014."

"Extrapolating Q4 results, we believe consensus may see downward revision of around 1-2% for both 2014/2015 due to impact from US, but equally we see scope for GM estimates to inch up by around 50bp, which would mean that EBITA estimates may remain broadly unchanged."

(Editing by Terje Solsvik)

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