Ericsson falls foul of economic pressure in Q2

Ericsson has posted a disappointing Q2 result with net income dropping 56% to €78 million (831 million kronor).

The result fell far short of analysts anticipated profit of €198 million (2.1 billion kronor), and follows quarterly losses from JV’s ST-Ericsson and Sony Ericsson. ST-Ericsson posted an operating loss of €115 million in Q2 despite an 18.5% increase in sales to €468 million.
The wireless infrastructure leader attributed its lackluster performance to restructuring charges and losses at Sony Ericsson as well as worldwide economic conditions.
“The effects of the global economic climate on the mobile infrastructure market are now more notable, especially in markets with currencies under pressure and tougher credit environment,” departing CEO Chief Executive Officer Carl-Henri Svanberg said in the statement.
Ericsson's results follow the lead of rival Nokia Siemens, which warned that the infrastructure market would contract a further 10% in the year ahead and posted a wider Q2 operating loss of €E188 million.
Scandinavian telco Telenor yesterday announced that it would cut its 2009 guidance for capex to 13%-15% from 15%-17%.
Ericsson’s revenue was up 7.4% for the quarter to €4.91 billion coming in under the average analyst forecast of €5.06 billion. Svanberg said network sales were down year-over-year, again a reflection on the market however strong acceleration of mobile data traffic was translating to high growth in sales of W-CDMA and transmission as well as upgrades of IP networks.
Ericsson which increased North American sales 34% year-over-year, driven by demand for mobile broadband and currency exchange rate effects.
Globally China was the best-performing market, while Asia-Pacific sales rose 10% year on year.