Ericsson (ERIC) is contemplating a SEK 7 million ($1 billion) (1 SEK= $1.5110 as on Sept 2, 2013) investment to construct three global Information and Communication Technology centers (ICT) in the next five years. Two of the three ICTs will be located in Europe and one will be in North America. This apart, Ericsson also intends to establish a new R&D hardware design building in Stockholm.
These ICT centers will primarily be supporting the R&D organization to develop and verify solutions, creating the foundation for the next generation technology and cloud-based services. Further, these centers will enable about 24,000 Ericsson engineers across borders to work in collaborative manner more efficiently and with ease.
Ericsson has always invested significantly on its research & development (R&D). R&D and services investments form the foundation for the long-term strength of the company. The company has its biggest R&D center in Sweden and other big R&D sites in China, U.S., Canada and Hungary. In 2012, Ericsson's R&D expenditures were SEK 32.8 billion, ($4.8 billion) (1SEK = $1.4780 average in 2012) reflecting approximately 14.4% of its revenues.
The proposed ICT centers will be built in a modular and scalable way using the state of the art technology to ensure efficient use of resources and space adaptable to the business needs. Ericsson projects that the permutation of architecture, design and locations will reduce energy consumption by up to 40%. Therefore, this substantial reduction in carbon footprint is a key initiative in Ericsson's vision of sustainable future.
Sweden-based centers are expected to begin operations by the end of 2013 and 2014, while the North American Center will only begin by early 2015. Ericsson recently has been receiving new contracts from leading telecom companies to manage their networks, which also require an infrastructure of this capacity. This initiative by Ericsson will support R&D and Services organizations to bring innovations faster to the market.
Ericsson currently has a Zacks Rank #3 (Hold). Other companies in the industry worth considering at the moment are Ubiquiti Networks Inc. (UBNT), Harris Corp. (HRS) and Tellabs Inc. (TLAB). Ubiquiti Networks has a Zacks Rank #1 (Strong Buy), while Harris Corporation and Tellabs Inc. carry a Zacks Rank #2 (Buy).
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