Ericsson's earnings impacted by slowdown in North American sales in 2014

Ericsson's net income declined by SEK1 billion (€106 million/$120 million) in 2014, even though the company successfully offset a drop in sales in North America with higher infrastructure equipment revenues from Europe, the Middle East and Asia.

Hans Vestberg, Ericsson CEO

Ericsson CEO, Hans Vestberg

The Sweden-headquartered vendor generated net income of SEK11.1 billion in 2014 compared to SEK12.2 billion in 2013, with sales growing SEK600 million year-on-year to SEK228 billion. Figures for the fourth quarter show a similar trend, with net income dropping 35 per cent year-on-year to SEK4.2 billion, and sales up a marginal 1 per cent to SEK68 billion.

CEO Hans Vestberg said that fourth-quarter sales grew strongly in the Middle East, Europe and Asia, but that the growth "was offset by a continued decline in North America."

Overall, sales at Ericsson's Networks business fell 2 per cent year-on-year in Q4 and by SEK200 million for the full year. The company's Global Services division increased Q4 sales by 10 per cent, and added SEK300 million to its full year total. The Support Solutions business increased full year sales by SEK500 million, though performance tailed off in Q4 when the figure fell 21 per cent year-on-year.

Vestberg noted that Ericsson's infrastructure contracts in its Q4 growth markets were mainly centred on mobile broadband equipment, while in North America operators focused more on buying equipment to improve capacity and quality. "Business activity slowed further in the quarter as operators remained focused on cash flow optimisation," Vestberg said of the North American market.

The CEO said all signs point to North America remaining weak in terms of sales of mobile broadband infrastructure in the short term.

Ericsson's Q414 net income fell short of the SEK4.5 billion analysts had forecast for the company, the Wall Street Journal reported, while one analyst told Reuters he was surprised by the lack of top end growth in Ericsson's earnings, given the strong global demand for LTE equipment.

Preliminary 2014 figures released by rival Huawei in mid-January showed a slowdown in the company's operating profit growth year-on-year. However, CFO Meng Wanzhou said a direct comparison to 2013 is not appropriate.

For more:
- see Ericsson's earnings statement [PDF]
- view this Wall Street Journal article
- see this Reuters report

Related Articles:
Huawei CFO defends 2014 earnings, as early figures show slowdown in profit growth
TeliaSonera picks Ericsson to manage field operations in Sweden
Vodafone appoints Ericsson networks head to replace Steve Pusey
Ericsson, Volvo and POC prepare to demo connected bicycle technology at CES
Ericsson, Orange hit 300 Mbps in French trials of FDD LTE carrier aggregation

Suggested Articles

Wireless operators can provide 5G services with spectrum bands both above and below 6 GHz—but that doesn't mean that all countries will let them.

Here are the stories we’re tracking today.

The 5G Mobile Network Architecture research project will implement two 5G use cases in real-world test beds.