Ericsson reported a net loss of £634m for the fourth quarter of 2012 following expected write downs at ST-Ericsson, its chipset joint venture with STMicroelectronics. This compares with a net profit of £150m in Q4 2011. However, the good news was that net sales rose 5% year-on-year and were up 23% on the previous quarter to £6.7bn, driven by strong sales in North America.
Net profit was hit by a £760m charge relating to the loss making ST-Ericsson joint venture, which Ericsson President and CEO Hans Vestberg (pictured) warned would be the case in December 2012. Following the announcement that its partner STMicroelectronics is to exit as a shareholder, the company said ‘it will explore various strategic options for ST-Ericsson assets’.
Net sales in Q4 2012 for Ericsson's divisions saw Networks growing by 6% year-on-year and by 23% on Q3 2012 to £3.5bn. Global Services were up 4% on 2011 and 15% on Q3 2012 to £2.8bn; Support Solutions grew by 6% year-on-year and by 9% on the previous quarter to reach £361m.
For the full year, Ericsson’s net sales remained flat at £22.9bn. Sales in the Networks division fell by 11% to £11.7bn, largely due to a decline in global CDMA infrastructure sales, but recovered in Q4 thanks to improved sales in North America. In contrast, the Global Services division grew by 16% in 2012 to reach net sales of £9.7bn, while the Support Solutions division saw net sales rise by 26% to £1.3bn.
Net profit for the full year fell to £593m, down from £1.2bn in 2011, following the write downs at ST-Ericsson. Excluding the impact of joint ventures including ST-Ericsson, operating income was £2.2bn, up 2% on 2011.
Vestberg commented: ‘Our segments showed mixed developments during the year with strong growth in Global Services and Support Solutions, while Networks had a more challenging year. Support Solutions went from losses in 2011 into profitability and together with Global Services represented close to 50% of Group sales in 2012, compared to 42% in 2011.
‘During the year profitability was negatively impacted by operating losses in ST-Ericsson, the ongoing network modernization projects in Europe as well as the underlying business mix, with a higher share of coverage projects than capacity projects. With present visibility of customer demand, and with the current global economic development, underlying business mix is expected to gradually shift towards more capacity projects during the second half of 2013.’
Vestberg added that North American remained Ericsson’s strongest market throughout the year, but regions such as South East Asia and Oceania and Sub-Saharan Africa gradually improved during the year.
‘The work to leverage our strength in the growth areas mobile broadband, managed services and operations and business support systems (OSS/BSS) has continued during the year, with both selective acquisitions and divestments. In addition, we completed the divestment of Sony Ericsson and introduced a new strategy for Support Solutions. Improving profitability, reducing costs and working capital remain high on the agenda also for 2013,’ concluded Vestberg.