Higher network equipment sales drive Ericsson revenue increase for Q1 2013

Sales up 2% year on year, but down 22% on the previous quarter, as profit improves compared with Q4 2012 thanks to increased network sales and reductions in operating expenses

Higher network equipment sales drive Ericsson revenue increase for Q1 2013

Ericsson saw a rise in revenue in Q1 2013, largely thanks to increases in network equipment sales and global services. Net sales were Swedish Krona (SEK) 52.0bn (£5.1bn) - up 2% year on year, but down 22% on Q4 2012.

Of this, the Networks division posted a 3% year-on-year increase to SEK 28.1bn (£2.7bn), but a 20% decrease on the previous quarter. Global Services generated revenues of SEK 21.5bn (£2.1bn) – up 4% on Q1 2012, but down 24% on Q4 2012. The Support Solutions division brought in sales of SEK 2.4bn (£237m) – down 19% year on year and down 33% on the previous quarter.

Net income for the quarter was SEK 1.2bn (£118m) – down 86% on the same quarter in 2012, but this was boosted by the proceeds of the sale to Sony of Ericsson’s 50% holding in the Sony Ericsson joint venture. The positive profit figure was an improvement on Q4 2012, when the company posted a loss of SEK 6.3bn (£624m).

Commenting on the results, Hans Vestberg, President and CEO of Ericsson (pictured), said: ‘Sales showed positive development in the quarter with a growth of 2% YoY, despite currency headwind. Sales for comparable units, adjusted for FX and hedging, grew 7%.

‘The sales increase was primarily driven by Networks and rollout services, following high project activities primarily in Europe and North America. North America remained the strongest region and showed a growth of 23% despite the decline in CDMA.

‘North East Asia had a challenging quarter with lower sales in South Korea, which remains one of the most advanced LTE markets but without parallel 3G deployments as in Q1 2012, continued structural decline in GSM investments in China and FX effects in Japan.

‘Looking at the areas of portfolio momentum, we see continued good development in Managed Services with 21 new contracts signed during the quarter. Within the Mobile Broadband area, the vendor selection processes for 4G/LTE in Russia and China have been initiated. We also see continued momentum for our SSR routing platform with 12 new contracts in the quarter. Within OSS and BSS demand continued to be strong.

‘At the Mobile World Congress (MWC) in Barcelona the trends in focus verify our belief that the Networked Society is coming to life. The growth in data traffic and video in the networks drives demand for mobile broadband and OSS and BSS. Other key topics at the MWC were software defined networks, cloud and machine-to-machine communications that will all be part of shaping the industry for the coming years.

‘Profitability improved YoY, adjusted for the restructuring charges related to the reduction of operations in Sweden concluded in Q1 and last year's gain from the divestment of Sony Ericsson. The improvement is mainly due to higher sales in Networks and a continued reduction in operating expenses, offset by negative operating income in Network Rollout and negative FX effects.

‘The underlying business mix, with a higher share of coverage projects than capacity projects, continued as anticipated during the quarter. With present visibility of customer demand, and current global economic development, we continue to believe that the underlying business mix will start to gradually shift towards more capacity projects during the second half of 2013.

‘We continue to execute on our strategy. During the quarter we announced the way forward for our JV ST-Ericsson and in April 2013 we announced our intention to acquire Microsoft's Mediaroom to strengthen our media position.

‘While macroeconomic and political uncertainty continues in certain regions, the long-term fundamentals in the industry remain attractive and we are well positioned to continue to support our customers in a transforming ICT market,’ concluded Vestberg.

Written by Wireless magazine
Wireless magazine

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