Ericsson profits up over 200%, boosted by broadband demand

Ericsson surprised analysts with first-quarter profits up 224 per cent compared to the same period last year. The company reported quarterly net profits of €460 million (4.1 billion kroner) with group sales reaching €5.9 billion (53 billion kronor), exceeding the €5.5 billion (49.1 billion kronor) estimated by analysts.

The company said the higher revenues were driven by increased demand for mobile broadband with five out of 10 regions showing growth year-over-year. Key to this success was the 39 per cent increase in sales in North America, a 46 per cent rise in India and northern Europe, 17 per cent in China and a huge lift of 74 per cent in North East Asia, mainly Japan and Korea.

In an interview with FierceWireless, Ericsson CFO Jon Frykhammar said the company is benefiting from strong mobile broadband demand in countries where it has a large presence--the U.S., Japan, China and Russia. "That creates a bit of what we call portfolio momentum," he said. "You are in the right spots from a country point of view as well as a portfolio point of view."

Ericsson reported that mobile data traffic more than doubled last year and was confident in forecasting this trend to continue every year in the near term. It believes that mobile broadband subscriptions worldwide will double to 1 billion this year.

However Ericsson CEO Hans Vestberg warned that the recent earthquake in Japan would likely cause delays to the delivery times of some products. He confirmed that the company is researching alternative component supply options and expected to claw back any slippage by the end of the third quarter.

But this is not the only problem to face the company as mobile operators look to cut capital expenditures in the years ahead. The recent announcement from France Telecom and Deutsche Telekom to discuss joint purchasing arrangements could impact Ericsson sales, while Huawei recently stated it is looking to triple annual sales to about $100 billion in the next five to 10 years.

Regardless of these worries, a bullish Vestberg told Dow Jones Newswires: "During 2010 we continued to gain market shares in 3G and at least maintained our market share in 4G/LTE of more than 50 per cent. In services we increased the market share and we continue to be the leading provider in the industry."

Vestberg provided no detailed guidance on the future, but said the company was well positioned to handle growing demand for wireless technology. In the interview, Frykhammar said Ericsson believes it can grow sales by between 4 and 10 per cent annually over the next three years.

For more:
- see this Bloomberg article
- see this Dow Jones Newswire article (sub. req.)
- see this Financial Times article
- see this AFP article

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