Ericsson profit dips despite year-on-year rise in Q3 sales

Ericsson revealed the UK and Germany were the only bright spots in its European sales in the third quarter, as it announced a 13 per cent drop in overall net income compared to the same period in 2013.

Hans Vestberg, Ericsson CEO

Ericsson CEO, Hans Vestberg

The Swedish vendor's net income fell from SEK3 billion (€326 million/$413 million) in the third quarter of 2013 to SEK2.6 billion in the recent quarter, and was down a marginal 1 per cent sequentially. The drop came despite a 9 per cent rise in sales year-on-year, which Ericsson CEO Hans Vestberg said was fuelled by growth in the Middle East, China, India, and Russia.

However, Vestberg noted that the sales growth in those regions was "partly offset by lower sales in North America," where operators "currently focus on cash flow optimisation."

Ericsson and local rival Nokia are increasingly focusing on Asia Pacific for sales growth as traditional European markets stagnate. Vestberg said little had changed in the third quarter, noting that "parts of Europe, mainly UK and Germany, showed growth year-over-year while the development in southern Europe continued to be weak."

The CEO said profitability "showed stable improvement across all segments" during the third quarter. The result was "primarily driven by favourable business mix, higher IPR revenues as well as efficiency enhancements."

On the flip side, Ericsson's operating income "was negatively impacted by effects from hedge contracts, higher operating expenses related to modems and the acquired Mediaroom business as well as planned ramp up of investments in IP," Vestberg noted.

Ericsson last month revealed plans to exit the LTE thin modems market in a move that will see up to 1,000 staff laid off. The vendor acquired the business when it dissolved a joint venture with STMicroelectronics, and is exiting to focus more resources on its networks research and development.

The vendor's third quarter sales of SEK57.6 billion beat the consensus SEK55.4 billion analysts polled by Reuters had forecast. A similar poll by Bloomberg produced a predicted average of SEK54.8 billion.

For more:
- see Ericsson's results announcement
- view this Reuters article
- read this Bloomberg report

Related Articles:
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Ericsson says there is little relevance between location and mobile usage
Ericsson modem exit places 1,000 jobs at risk
Ericsson, NSN maintain Asia-Pacific progress with LTE tests

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