Ericsson improves profit despite drop in sales

Leading infrastructure and solutions vendor Ericsson has reported a 38 per cent increase in net profit year on year for the third quarter of 2013, despite sales dropping by three per cent on the same period in 2012. Profit for the quarter stood at SEK3bn ($472m), while sales were at SEK53bn.

The firm’s Support Solutions division took the hardest hit, with revenues dropping 29 per cent year on year to SEK2.4bn. Divestments, portfolio changes and “somewhat lower sales of compression technology” were to blame, Ericsson said. The unit’s operating margin dropped from 14 per cent in 3Q12 to -5 per cent in 3Q13. Turnover for Support Solutions is ten per cent of the Networks and Global Services units’ individual income, so the impact on overall figures was not drastic.

Despite Networks sales dropping fractionally, from SEK26.9bn to SEK 26.7bn, Ericsson doubled the unit’s margin from five per cent to ten per cent. The Global Services unit’s margin was flat at eight per cent on a slight drop in  sales from SEK24.3bn to SEK24.0bn

Foreign exchange rates were partly to blame for downturns in sales, said CEO Hans Vestberg, as well as several large projects nearing completion, in North America and Japan. The firm is now looking to China as well as its European homeland for the next phase of growth, he said.

“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,” Vestberg said.

“The pace is picking up in the European market with continued WCDMA/LTE investments and a major investment announcement by one of the large operators. Ericsson now sees growth in several European markets and margins are also improving as the network modernization projects gradually come to an end and we engage more in new capacity and LTE business.”