Ericsson sees 63 per cent drop in Q2 profit

Swedish equipment vendor Ericsson has seen its profit drop 63 per cent year-on-year in 2Q12. The bottom line figure stood at SEK1.2bn ($171m), compared with SEK3.2bn in the same period a year earlier. Notably, in 1Q12, the firm recorded SEK8.8bn in profit.

Sales over the period remained flat – the firm saw just a one per cent increase – to SEK55.3bn from SEK54.8bn last year.

Profitability was impacted by poor performance in its networks division and a substantial loss made by ST-Ericsson. ST-Ericsson is the Swedish vendor’s semiconductor joint venture with STMicroelectronics.

“In the quarter, demand for Global Services and Support Solutions was strong, while Networks sales decreased year-on-year mainly due to the expected decline in CDMA equipment sales as well as lower business activity in China, including weaker sales of GSM and lower 3G sales in Russia,” explained Hans Vestberg, President and CEO of Ericsson.

ST-Ericsson’s sales dropped year-on-year from $385m in 2Q11 to $344m, and the JV also recorded a quarterly loss of $318m – the loss meade in 1Q11 was $221m.

“Our joint venture ST-Ericsson is still in a challenging situation due to a significant drop in sales of new products to one of the largest customers and continued decline in legacy products,” added Vestberg. “The company continues to focus on securing the successful execution and delivery of its NovaThor ModAp platforms and Thor modems to customers while executing on company transformation aiming at lowering its break-even point.”