Phones Trigger 2nd EPS Cut for Ericsson This Week

3/20 - "A big unit miss (22M vs. 26M est) drove margins to ~7% vs. 13% in 4Q. despite a slight ASP beat (EUR 120 vs. 117 est)...SE cited component shortages (we believe in mid tier) and European market weakness. We would substitute share loss on product migration challenges for market weakness - we do not believe the European market has slipped."

"Our estimates slip again from $1.58/$1.77 to $1.38/1.60...We are cutting our target price from $20 / SEK 13 per share to $18/ SEK 12, driven by the near 40% cut in our Sony Ericsson EBIT forecasts. "

"While new product launches for 2H08 appear promising, few handset vendors have recovered quickly after a sharp margin and unit shortfall...Some carrier capex increases (China Mobile) and possible ERIC opex cuts could fuel a 2009 restructuring story...We see continued risks for both Sony Ericsson and Ericsson (currency) and thus retain our cautious near term stance."