Ericsson beats analyst forecasts for Q4 operating profit, but misses on sales

Ericsson beat analysts' operating profit predictions for the fourth quarter of 2015, but fell short of expectations in terms of sales revenue during the period.

The Sweden-headquartered infrastructure company generated an operating profit of SEK11 billion (€1.1 billion/$1.2 billion) during the fourth quarter, an increase of 75 per cent on the same period in 2014 and above the average SEK10.6 billion predicted by analysts polled by Reuters.

However, the news agency reported that Ericsson's fourth-quarter net sales of SEK73.6 billion fell short of the SEK74.1 billion forecast by analysts, and that the company's gross margin of 36.3 per cent was lower than the average 37.3 per cent predicted.

Ericsson president and CEO Hans Vestberg noted that the company increased sales by 8 per cent year-on-year on a reported basis, and that "higher IPR licensing revenues and lower operating expenses" were major contributors to an annual rise in profitability.

Net income for the fourth quarter hit SEK7 billion, a 68 per cent increase on the same period of 2014.

Figures for the full year of 2015 show net income increased from SEK11.1 billion in 2014 to SEK13.7 billion as sales grew from SEK228 billion in 2014 to SEK246.9 billion in 2015. While operating income also increased year-on-year to SEK21.8 billion, Ericsson's gross margin declined from 36.2 per cent in 2014 to 34.8 per cent in 2015.

Vestberg highlighted a recovery in Ericsson's North American sales and Chinese 4G deployments as major contributors to the company's growth during the fourth quarter. However, Reuters also noted that Ericsson's fourth-quarter figures were lifted by a patent licence agreement the company signed with Apple that saw the U.S. company make an undisclosed one-off payment to Ericsson during the quarter.

The CEO added that business in Europe was "mainly driven by the transition from 3G to 4G and capacity enhancements," as operators "increased their investments in telecom core networks, driven by deployment of new service offerings such as VoLTE (Voice over LTE)."

Ericsson saw ongoing weakness in markets including "Russia, Brazil and parts of the Middle East" during the fourth quarter, which Vestberg said was "mainly due to macro-economic developments." Emerging markets including "India, Indonesia and Mexico remained strong" during the period, he said.

For more:
- see Ericsson's earnings statement
- view the full earnings report (PDF)
- read this Reuters article

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