Ericsson’s Q4 loss halves full year profit

Swedish network infrastructure vendor Ericsson has posted a SEK6.3bn ($998m) net loss for 4Q12, bringing the firm’s net income for the full year down to SEK5.9bn, less than half of the SEK12.6bn it recorded for 2011. Sales for the quarter improved by five per cent year on year to SEK66.9bn, and remained flat for the full year at SEK227.8bn.

The firm said its profitability was negatively impacted by operating losses in its semiconductor  joint venture ST-Ericsson and ongoing network modernisation projects in Europe.

It added that there was strong growth in global services and support solutions businesses, while the networks business had a more challenging year. Support solutions went from making losses in 2011 into profitability and together with global services, represented close to 50 per cent of group sales in 2012, compared with 42 per cent in 2011.

“If you asked me to grade these results, I would say that they are a B,” the firm’s CFO Jan Frykhammar told “What is good is that the company saw growth in the networks business in the fourth quarter and also that we managed to reduce working capital – which has been a big challenge for us.”

He added that Ericsson is examining strategic options for the assets it holds in ST Ericsson. JV partner STMicroelectronics has decided to exit and Ericsson has decided not to acquire that share of the company.

“We have decided to not talk more about those options until we have something to say – we will not speculate because that is not good for anyone,” added Frykhammar. “But there will be changes in 2013 and 2014 in terms of what assets will be in ST Ericsson, if anything.”

He added that the compound annual growth rate (CAGR) of the network infrastructure market for the next the years is between three to five per cent, CAGR for services is slightly higher and support solutions, in turn, is slightly higher than that.

“If we maintain our positions, there will be a shift in those different mixes over time driven by what’s happening in the market,” said Frykhammar.

“We will continue to make sure that we have the biggest market share in networks, particularly in the big cities – because that is where data traffic is growing faster than in other areas.”

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