PHILADELPHIA — LM Ericsson had a banner year in 2008 as revenues rose 11 percent and cash along with short-term investments soared by 30 percent. Last year's performance was even more impressive as rivals like Alcatel-Lucent and Nortel Networks Inc. struggled with declining market share and financial distress.

Now the Swedish telecommunications equipment maker must prove its extraordinary performance during a major industry downturn was not a fluke, and that it can repeat the success even as the global economy continues to weaken.

Ericsson appears to have the resources to again outflank the competition in its key network equipment market. But it faces significant challenges in other industry segments, including its Sony Ericsson wireless handset business and a new joint venture with STMicroelectronics. The ST-Ericsson joint venture will require significant cash outlays on the part of Ericsson in the short-term, according to the companies.

Industry analysts see Ericsson performing strongly in 2009 despite the potential for further contraction in the telecommunication equipment market. They point to the company's large cash reserves, attractive and extensive product lines, wide geographical customer base and its rivals' financial problems.

"Although Ericsson will face what is likely to be a challenging telecom infrastructure market for 2009, its strong business and financial positions are likely to provide credit support," Standard & Poor's analyst Patrice Cochelin said in a report in which he also revised the company's outlook to stable from negative.

Ericsson closed 2008 with a boatload of cash in the bank, a healthy line of credit and strong sales growth—up a formidable 23 percent even in an otherwise terrible 2008 fourth quarter—while many of its major competitors are in financial distress.

This year, Ericsson expects to increase its market share in the network equipment market despite the prospect for continued pricing pressure, reduced capital spending by service providers and stiff competition among the top players in the sector.

"There are uncertainties and it's not easy to predict exactly how things are going to develop," Carl-Henric Svanberg, president and CEO of Ericsson, said during a conference call announcing the company's fourth quarter results. "There are lots of opportunities to take market share, and I think it will come because there are weaker players out there."

Bucking the negative sales trend

Ericsson surprised the market in 2008 with solid performance in the midst of what is turning out to be the worst global economic environment in decades. Results were boosted by a major contract wins at service providers in the United States and elsewhere.

The company continued to garner similar wins in 2009, including a major contract in February with Verizon Wireless to supply equipment for the telecom service provider's Long-Term Evolution (LTE) network. Contract agreements like this will help Ericsson maintain its revenue growth in 2009, according to analysts.

"Most of this new business—representing both new wins as well as upgrade and expansion work—is centered overseas, at a time when capital spending by North American vendors is increasingly constrained," said Argus analysts in a report. "Yet Ericsson has even won [a] prime place in the major domestic network upgrade to 4G LTE planned by Verizon Wireless."