Ericsson turnover down 3% to £5.1bn but net income up 38% for Q3 2013

Profitability up despite slightly lower revenue thanks to higher gross margins, an improved business mix and less margin dilution from European network modernisation programmes

Ericsson turnover down 3% to £5.1bn but net income up 38% for Q3 2013

Ericsson posted revenues of Swedish Krona (SEK) 53bn (£5.1bn) in the third quarter of 2013 – down 3% year-on-year and down 4% on Q2 2013. However, net income rose by 38% year-on-year to SEK 3bn (£291m) and up 99% on Q2 2013.

The company said its improved profitability was down to higher gross margins due to “less dilutive impact from European network modernisation and somewhat improved business mix”.

Hans Vestberg, President and CEO (pictured), attributed the yearly drop in sales to unfavourable foreign currency exchange (FX). He added: "We are currently seeing sales coming under some pressure. In addition to FX, the major drivers for this development are the two large mobile broadband coverage projects, which peaked in North America in the first half of 2013. We also saw impact from reduced activity in Japan where we are getting closer to completion of a major project.”

He continued: “The 4G/LTE tenders in China continue and so far two of the major operators have made their choices. Despite having insignificant market share for 3G, Ericsson has been named technology partner for both these operators and we will now build on this initial footprint.” Ericsson recently won an approximately 10% share of China Mobile’s massive 4G rollout programme.

Vestberg noted that the pace of investment is picking up in the European market with continued WCDMA/LTE investments and “a major investment announcement by one of the large operators”.

He added that Ericsson now sees growth in several European markets and margins are also improving as the network modernisation projects gradually come to an end and the company engages more in new capacity and LTE business.

Ericsson’s revenue split saw Networks accounting for SEK 26.7bn (£2.5bn) in Q3 – down 1% year-on-year; Global Services pulled in SEK 26.7bn (£2.3bn) – also down 1% year-on-year; and Support Solutions gained SEK 2.4bn (£0.23bn) – down 29% year-on-year.

Vestberg said: “The momentum for Professional Services (part of the Global Services division) continued with stable earnings and 59 signed managed services contracts year to date. As a result of our continuous work to implement global processes, methods and tools to increase efficiency, Global Services margins improved during the quarter.”

Of Ericssons’s 11 regions, North America remains its most important market by far accounting for SEK 14.5bn (£1.4bn) of total sales in Q3, followed by North East Asia (£529m), Mediterranean (£553m), Latin America (£514m), Middle East (£427m) and Western and Central Europe (£427m).

Notable events during the quarter included the launch of a small-cell product, the Ericsson Radio Dot System, for indoor coverage, which the company believes will open up new revenue opportunities for operators. It said the initial customer response has been very positive. In addition, Ericsson closed the acquisition of Mediaroom, which it said places Ericsson as the world's largest IPTV player, by market share.

Vestberg concluded: “The macroeconomic climate has stabilized in many OECD markets. However, uncertainty still remains in certain parts of the world. 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.”

See also:

Ericsson year-on-year sales flat for second quarter of 2013

NSN sees net sales fall by 24% to £2.2bn in the third quarter of 2013 

Written by Wireless magazine
Wireless magazine

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