Ericsson sells remaining stake in Juniper

The wireless networking company announces the sale of its remaining stake in Juniper Networks, a much needed cash infusion for the plagued mobile phone maker.

2 min read
Ericsson announced Tuesday the sale of its remaining stake in Juniper Networks, a much needed cash infusion for the plagued mobile phone maker.

The sale of the 1.9 percent stake generated a gain of about $538 million for the first quarter, according to the Sweden-based company. Ericsson's March 12 revision of earnings expectations do not include the Juniper stock sale.

Ericsson also said Tuesday it plans to cut an additional 2,600 jobs, bringing the number of reductions announced this year to about 3,300. At the end of last year, Ericsson said it had about 105,000 employees.

Investors punished Ericsson after the company warned March 12 that earnings and revenue for the next quarter would fall below previous company expectations.

The Nasdaq has dived about 21 percent this year and more than 60 percent from its high a year ago, making it a perilous time for tech stocks.

Some industry observers believe it's fortunate Ericsson's sale of its stake in Juniper has already taken place.

"It looks as if it's a positive for the stock...because we don't have that selling pressure going forward," said Frank McEvoy, an analyst at U.S. Bancorp Piper Jaffray.

Sometimes an added block of shares on the market increases the supply to levels that do not support current price levels, hurting the stock value.

Ericsson owned about 6 percent of Juniper as of last August and sold some of the stake last December. The final 1.9 percent stake of more than 5 million shares represents the last of Ericsson's holdings in the network equipment maker.

The Swedish company also cautioned investors last July that losses in its mobile phone unit would drag third-quarter profit below first- and second-quarter levels. As a result, the company's stock has fallen about 41 percent this year and trades around $6.50 compared with its 52-week high of $26.31.

The two networking companies have an existing sales relationship. Sales to Ericsson comprised more than 10 percent of Juniper's fourth-quarter 2000 revenue. Ericsson also bought some Juniper shares before the company's initial public offering in June 1999.

The companies formed a joint venture last year to establish a presence in the nascent market to send Internet traffic over cell phones and sell mobile Internet routing products to Internet service providers and mobile operators, with a focus on third-generation high-speed networks.

Company representatives said the stock sale does not affect the status of the joint venture.