Ericsson Shares Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares network equipment giant Ericsson (NAS: ERIC) plunged 16% today after its quarterly results came in well below Wall Street estimates.

So what: Ericsson has aggressively grown its market share over the past several months, but today's ugly fourth-quarter results -- profit plummeted 66% -- show that the strategy is weighing on margins much more than Mr. Market had expected. When you throw in weakened demand from U.S. carriers and big losses at its joint ventures, it's hard for investors to find anything positive about the report.

Now what: Today's plunge might be an opportunity for extra-patient investors. "We believe that the industry fundamentals for longer-term positive development remain solid," CEO Hans Vestberg said. "Short-term, we expect operators to continue to be cautious with spending, reflecting factors such as macro economic and political uncertainty." Given its dominant position in the sector, Ericsson might even benefit from an industry shakeout of sorts.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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