Ericsson’s sales in the first quarter of 2014 were down 7% year-on- year and 28% on the previous quarter at SEK 47.5bn (£4.2bn). Net income was up 41% year-on-year to SEK 1.7bn (£153m), but was down 74% on the previous quarter (Q4 2013).
Hans Vestberg, president and CEO of Ericsson, (pictured) said: ‘The main reason behind the decline in sales is lower revenues from two large mobile broadband coverage projects in North America, which peaked in the first half of 2013, and the impact from reduced activity in Japan.
‘This was partly offset by growth in China, Middle East and Latin America. The decline in sales impacted segment Networks as well as the Global Services network rollout business.’
Vestberg continued: ‘Our focus on profitability is paying off with gross margin improvement year-on-year, both including and excluding restructuring. All segments also showed improved operating margins. The business mix in the quarter was predominantly driven by mobile broadband capacity projects. In addition, some of our customers invested more in software to improve network performance and user experience.’
Operating margin improved year-on-year in all segments to 5.5% (4.0%) mainly driven by mobile broadband capacity sales and lower restructuring charges.
Vestberg added: ‘Operating cash flow amounted to SEK 9.4bn (£850m), compared to a negative operating cash flow of SEK -3.0bn (£271m) in the first quarter last year. The payment from Samsung, related to IPR licensing, as well as lower sales had a positive effect on cash flow. Our continued efforts to reduce working capital through a better order-to-cash process are progressing well.’
He noted that with current visibility, key contracts awarded will gradually impact sales and business mix, mainly in the second half of the year.