Hoping to raise $1 billion to be used toward cellular expansion efforts, L.M. Ericsson said it is proposing an equity share offering.
“There is an increased need for working capital in the rapid growth phase which Ericsson is currently experiencing,” noted Lars Ramqvist, Ericsson’s chief executive officer. Especially for its wireless telephony operations, the company foresees issuing the stock will allow greater expansion possibilities. Ramqvist also noted a number of the telecommunications operators that have placed equipment and systems orders with Ericsson have requested financial assistance.
Ericsson said it planned to determine and publish subscription price and other terms of the stock issue on Aug. 30, and that a decision on the board’s proposal would be made Sept. 7 at an extraordinary general meeting. Current shareholders, of record by Oct. 2, would receive preferential purchase rights on the proposed offering.
The Swedish company also released second quarter and six-month financial results. Ericsson reported $306.3 million in net income for the six-month period ended June 30, a 52 percent increase from net income of $201.8 million recorded in the first half of 1994. Ericsson’s earnings per share totaled 35 cents for the six-month term, compared with 23 cents for the corresponding period last year. For the second quarter, net income totaled $190.5 million, up 45 percent from $131.6 million last year.
Net revenues for the first six months of the year rose 18.4 percent to nearly $6 billion, reported Ericsson, compared with $5 billion a year ago. In the second quarter alone, net sales reached $3.2 billion, up 14.1 percent from $2.8 billion in the second quarter of 1994.
Activity in the radio communications sector primarily is responsible for the company’s 18 percent increase in consolidated net sales the last six months, said Ericsson. This division reported $3.2 billion net sales for the six months, a 36.8 percent increase, compared with $2.4 billion for the same period last year. For the quarter, radio communications saw $1.8 billion net sales, a 33 percent increase from $1.4 billion in 1994.
Net sales for wireless phone operations within the sector increased by 44 percent in the first six months of 1995.
Ramqvist said Ericsson’s decision not to develop Code Division Multiple Access technology should not noticeably affect the company. Ericsson is a leading proponent of rival Time Division Multiple Access technology.
“We have made the assessment that CDMA [Interim Standard]-95 does not provide any decisive economical or technical improvements for our customers … than what has been achieved with the already well-proven TDMA technology,” Ramqvist said. “Nonetheless, by having participated in the development (of CDMA), we have prepared ourselves to become a supplier, including a terminal supplier, when CDMA technology proves that it is commercially viable for large systems.”
Ramqvist also noted Ericsson has U.S. patents covering the IS-95 standard, “whereby future users of this technology must have a license from Ericsson.”
Order bookings for the company climbed almost 31 percent in the first half of 1995, compared with the first half of 1994. For wireless telephony operations, order bookings grew 74 percent in the same period.
The United States is the strongest market for radio communications, noted Ericsson, followed by China, Great Britain, Australia and Germany.
Net sales increased in Ericsson’s public telecommunications, business networks, components and microwave systems sectors as well.