Ericsson profits in hamstrung market
Ericsson boosted profits and maintained sales during 3Q10, but warned that global component shortages will continue to blight the infrastructure business.
The firm grew net income a massive 360% to 3.6 billion Swedish Kronor (€387 million) due mostly to income from its Sony Ericsson handset joint venture, which reported its third consecutive quarterly profit last week.
Operational improvements also boosted Ericsson’s net during the quarter, as group sales grew just 2% year-on-year to 47.5 billion Kronor.
The firm’s Global Services division contributed 40% of the group sales figure, growing 3% year-on-year to 19.1 billion Kronor as increased sales of managed services offset a slight decline in network rollouts.
However the ST Ericsson joint venture continues to run at a loss- up from $112 million (€80.4 million) in 3Q09 to $121 million in 3Q10. Ericsson noted the division is still in the throes of a restructuring program, and that sales grew 4% year-on-year.
Chief Hans Vestberg said the infrastructure market is slow due to “continued cautious operator investments,” but noted that demand for mobile broadband kit is on the up, and that Chinese carriers restarted investments in 2G capacity expansions during the period.
“Across the world, operator focus is still on reducing operating expenditure and outsourcing of operations,” he said.
While analysts had expected more growth in sales during the period, Ericsson’s overall results came in ahead of predictions, FT.com reported.
WestLB analyst Thomas Langer said the market is undervaluing Ericsson’s potential in the high-margin services business, WSJ.com revealed.