Ericsson net profit up 116% to £809m in first quarter of 2012

Net sales down 4% to £5.7bn due to decline in CDMA sales and lower mobile operator spending on network infrastructure

Ericsson net profit up 116% to £809m in first quarter of 2012

Ericsson posted a net income of £809m in the first quarter of 2012 - an increase of 116% on Q1 2011 and a 490% increase on Q4 2011. Profit was aided by a £680m boost from the sale of the company’s 50% share in mobile handset manufacturer Sony Ericsson to Sony.

Net sales declined by 4% to £5.7bn compared with Q1 2011 and were down 20% on Q4 2012. Sales of network infrastructure dropped by 18% to £2.5bn, while sales in the Global Services division rose 18% to £1.8bn. Support Services were up by 33% to £275m. 

Hans Vestberg, President and CEO, commented: ‘Sales of high-performance mobile broadband developed well in North America, Japan and Korea, while other regions such as Europe including Russia, parts of Middle East and India were weaker. CDMA continued its expected decline in the transition to LTE. Our services business showed continued momentum where especially Professional Services developed favorably. Support Solutions (former Multimedia) increased organic sales.

‘In the quarter, we took important steps in our strategy execution. The announced acquisition of BelAir Networks adds Wi-Fi capabilities to our hetnet portfolio and by acquiring Technicolor’s Broadcast Services Division we have strengthened our position in media and broadcasting services, targeting a leadership position in Europe.’ 

Vestberg continued: ‘With the completed divestment of Sony Ericsson, we have left the consumer part of the handset business in order to focus on enabling connectivity for all devices, handsets and beyond. Last year, we gained market share in our core businesses and continued to build a strong LTE position where we have more than 60% market share.

‘Late 2010, we took a strategic decision to increase our market share in Europe when operators started to modernize their networks and replacing old infrastructure with new multi-standard radio base stations. This, together with the business mix with more coverage than capacity projects, has, as expected, had a negative impact on gross margin year-on-year and is expected to prevail short-term.

‘Our joint venture ST-Ericsson has launched a revised strategy and actions to reduce its break-even point. We remain confident that ST-Ericsson has a strategic position in the industry to enable the device ecosystem,’ concluded Vestberg.

ST-Ericsson, the company’s 50:50 joint venture with STMicroelectronics, which produces microchips for mobile phones and tablets, posted a net income loss of £192.7m in the first quarter of 2012. Net sales dropped to £179m from £253m in Q1 2011 and were down on Q4 2011’s net sales figure of £274m.

Earlier this week (23 April 2012) Hans Vestberg announced a new strategy to ensure it ‘can reach sustainable profitability and cash generation’. It will focus on delivering competitive integrated modem plus application processor solutions for smartphones and tablets.

ST-Ericsson will partner with STMicroelectronics in the development of future application processors. It will improve R&D execution to accelerate time to market and it proposes to shed 1,700 employees worldwide.

Annual savings of around £200m are expected from this new and the on-going restructuring upon completion by the end of 2013. Total restructuring costs are estimated to be approximately £80m to £92m.

Written by Wireless magazine
Wireless magazine

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