Ericsson reported continued weakness in the North American market in the first quarter as carriers continue to hold back on investing heavily in networks as they pay for spectrum licenses and other expenses. The Swedish vendor reported drops in net income and operating profit despite a jump in top-line sales that benefited from currency moves. Meanwhile, Ericsson's licensing revenue took a hit due to an ongoing patent dispute with Apple.
Ericsson will cut 2,200 jobs in Sweden, mainly in research and development (R&D) and its supply chain, as it seeks to slash costs and boost profitability. The vendor hinted at the job cuts in November, but at the time did not say how many employees would lose their jobs.
Ericsson posted tepid sales in the fourth quarter and although the company's gross margin was higher than expected the Swedish vendor is facing continued weakness in North America, its largest market by revenue.
Ericsson plans to cut costs by $1.21 billion by 2017 and will slash jobs as part of that effort, though the vendor did not say how many positions it will cut. The cost cuts are part of Ericsson's larger strategic transformation toward software, media and working with customers that are not telecommunications carriers.
Ericsson reported third-quarter sales that beat analysts' expectations, but falling revenue in the North American market cast concerns over the vendor's forthcoming fourth-quarter results. North America is the company's largest region by revenue and carrier spending in the market has traditionally been a growth driver for Ericsson--but that could be starting to shift.
Nokia shareholders ushered in a new chapter for the company this week after they agreed to the sale of the devices and services unit to Microsoft and essentially gave the green light for a future based on networks. Like Ericsson, the Finnish company will no doubt have taken heart from Vodafone's stated intention to maintain high levels of network investment over the next two years and maybe beyond.
Vodafone CEO Vittorio Colao's comments that the operator has "beautiful assets" made amusing headlines, but Colao was also making a serious point: while his focus is on expanding the company's networks, Colao said he would be open to a buyer if they were interested enough.
Ericsson reported a bigger decline in profit than analysts expected in the first quarter of 2013, but the Swedish equipment manufacturer said the quarter was in line with its own expectations and expects softer areas of development to balance out over the year.
Ericsson surprised analysts by reporting fourth-quarter sales figures above estimates helped by North American orders rising sharply to €1.97 billion the fourth quarter, a 51 per cent increase. overall net sales grew 5 per cent year-over-year to €7.77 billion.
Ericsson reported that its net profit declined 43 percent in the third quarter as weaker network sales and cautious operator spending weighed down its results. Slimmer profits from large-scale network modernization projects weakened the company's margins, and weaker sales in key regions depressed earnings, but the Swedish vendor got a boost from strong North American sales.