Ericsson net sales rise by 9%, but net income falls by 13% in Q3 2014

Sales growth year-over-year was mainly driven by the Middle East, China, India and Russia, but was partly offset by lower sales in North America

Ericsson net sales rise by 9%, but net income falls by 13% in Q3 2014

Ericsson reported that sales increased by 9% year-on-year to SEK 57.6bn (£4.9bn) for the third quarter of 2014. Sales for comparable units, adjusted for currency, grew by 3% with stable operating income.

Operating income fell by 8% to SEK 3.9bn (£334m) mainly due to the revaluation of unrealised hedge contracts. Net income fell 13% year-on-year to SEK 2.6bn (£223m)

Hans Vestberg, president and CEO of Ericsson, (pictured) commented: ‘Sales growth year-over-year was mainly driven by the Middle East, China, India and Russia, but was partly offset by lower sales in North America.

‘Mobile broadband sales increased both year-over-year and quarter-over-quarter as we have started to deliver on previously communicated key contracts. We are executing on 4G/LTE contracts in Mainland China and Taiwan and improving sales in Japan.

‘Furthermore, the investment climate in India continues to improve. Sales in parts of Europe, mainly UK and Germany, showed growth year-over-year, while the development in southern Europe continued to be weak.

‘Sales in North America continued to be driven by operator investments in capacity and quality enhancements. However, business activity slowed down during the quarter as operators currently focus on cash flow optimisation,’ said Vestberg.

The divisional revenue breakdown shows net sales in: Networks up 13% to EK 30bn (£2.5bn); Global Services up 2% to SEK 24.5bn (£2.1bn); and Support Solutions up 30% to SEK3.1bn (£266m).

Geographically, North America accounted for by far the largest amount of sales, down 3% in the quarter to SEK14bn (£1.2bn), followed by South East Asia (SEK 7bn), the Middle East (SEK 6bn), Latin America (SEK 5.9bn) and the Mediterranean region (SEK 5.2bn).

Vestberg said: ‘We continue to execute on our strategic agenda; to improve our profitability in the core business in order to invest in targeted areas such as IP networks, Cloud, TV & Media and OSS & BSS.’

Three important acquisitions were made in the quarter:
•    MetraTech accelerates the company’s cloud and enterprise billing capabilities within BSS
•    Fabrix Systems extends its overall leadership position in TV & Media
•    Majority stake in Apcera that strengthens Ericsson’s position in enterprise cloud.

‘During the quarter we took the strategic decision to stop all further development of modems and shift some R&D resources from segment Modems to Networks to pursue growth opportunities in the radio business,’ said Vestberg.

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