Ericsson on a roll with mobile broadband after shaky 2010

Having evangelised for some years that mobile broadband usage would drive future infrastructure sales, Ericsson is now able to report that its advocacy is coming true.

Speaking on its fourth-quarter analyst briefing last week, Ericsson CEO Hans Vestberg presented a buoyant set of results with the highlight being that Ericsson had achieved a fourth quarter pretax profit rise of 18 per cent year-on-year to SEK7.8 billion (£753.4) million - driven by an 8 per cent sales increase to SEK62.8 billion (£6.06 billion).

While not detailing the breakdown of numbers, these much-improved results were seemingly due to the growing demand from operators to boost their mobile data networking capabilities.

If this wasn't enough, Vestberg seemed to predict even greater success for the future by forecasting an annual doubling in mobile data traffic over the coming years. "We are well positioned to support our customers in meeting the changing consumer behaviour."

While Vestberg gave a much more assured presentation than at last year's Mobile World Congress, the company's overall 2010 financial performance was "uneven." Making no reference to the dire results during the first half of 2010, the CEO would only admit that component shortages had impacted the firm's ability to deliver equipment during the second and third quarter, and lower margin upgrade sales had dented profitability.

However, the company's CFO, Jan Frykhammar, was a little more candid, admitting that 2010 had been a year of two halves -pointing again to the damaging shortages of components (apparently still ongoing, but at a lower level) and the dire financial performance of its joint ventures (JVs) - Sony Ericsson and ST-Ericsson.

Speaking to FierceWireless:Europe, the Ericsson exec confirmed that these JVs were still racking up losses - albeit at much lower levels than during H1/2010, and said: "It's something we've been struggling with."

He emphasised that Sony Ericsson had worked hard to improve quality, and that Ericsson was now happy with the progress being made. But the ST-Ericsson JV was proving more stubborn to turn around and had battled with the issues of integrating three companies along with having to support legacy technology associated with feature phones.

Undaunted by these experiences, Frykhammar confirmed that the company would look to enter into JVs in the future: "Mutual trust and the right mix of assets are key."

While supporting the view that the growth in mobile broadband usage was making 2011 look considerably better, there were other problems to contend with, said the CFO. "There are some countries that continue to experience problems with their financial well-being, such as Spain, Ireland, Greece and others. This might impact on the investment opportunities for operators in these regions."

Frykhammar also commented on the success of its Nortel acquisitions, claiming that the CDMA and LTE aspects had fitted well into the Swedish firm's technology portfolio, and helped significantly with the sales growth in Ericsson's North American market.

Also of note was the continued improvement in Ericsson's net cash position, with Frykhammar admitting that there were three reasons behind building this reserve. "It generates business for us with customers perceiving we're a financially strong partner to work with, we score highly with credit rating agencies, and we're always looking for M&A opportunities where we can try and consolidate markets or create new growth."

Looking to 2011, Frykhammar confirmed that the increasing popularity of smartphones will continue to drive mobile broadband growth, but also predicted that operators would become more innovative with how the overall package would be marketed. "I believe we'll see new business models, including tiered pricing, for mobile broadband, and a greater involvement by operators in offering services to users."

Having travelled the bumpy road of 2010, Ericsson would appear to have entered 2011 with new-found enthusiasm--and a healthy balance sheet to help it consolidate its leadership position.--Paul