Ericsson profit drops 30 per cent

On Thursday, Swedish kit vendor Ericsson recorded a 30 per cent drop in net profit for the first quarter of 2009, coming in at SEK1.8bn (Eur168m) compared to SEK2.6bn in the same period last year.

However the firm said that the effects of the global recession remained “limited” as net sales for the quarter were up 12 per cent year on year to SEK49.6bn compared to SEK44.2bn in 2008.

Carl-Henric Svanberg, president and CEO of Ericsson, said that investments in wireless networks continues, bolstered by rollouts of new networks in markets such as the US, China and India.

“Sales of network infrastructure are stable and the demand for professional services is growing. We have won several strategic contracts during the quarter, including 3G for China Unicom, 4G for Verizon Wireless and managed services for Vodafone UK,” he said. “Some operators are also more cautious with longer-term investments in fixed networks, such as rollout of fibre networks. Most operators, however, have healthy financial positions, there is a strong traffic growth and the networks are fairly loaded.”

Svanberg added that cost reduction activities are running according to plan, targeting annual savings of SEK10bn from the second half of 2010.

But Ericsson’s sister operations are not doing so well. Earlier this month handset vendor Sony Ericsson’s first quarter loss before taxes came in at Eur293m, compared to a profit of Eur133m in the same period last year.

Meanwhile, the 50/50 joint venture between Ericsson and STMicroelectronics, ST-Ericsson, which started operations on February 2 2009, reported a net loss of $89m in the first two months of its operation. The company was hit by the slowdown in global handset sales. Net sales came in at $391m.