Growing competition hits Ericsson's margins

While Ericsson's share price jumped late last week by more than a quarter after the company unveiled surprisingly strong first-quarter profits, its CEO, Carl-Henric Svanberg, warned of uncertainties ahead.

Chief among his concerns was price competition which played a significant role in the sharp year-on-year decline in the company's Q1 infrastructure margins. He also highlighted three other areas that contributed to this margin squeeze-- business mix, the effects of amortisation connected to acquisitions, and the weaker U.S. dollar.

But Svanberg remained confident that the network market in Western Europe would start to pick up at some point, but said "it will gradually happen." However, he said upgrades in Western Europe were currently being obstructed by telecoms consolidation in the region. But he said neither the strong growth in India and China, nor the revival of demand in North America warranted altering Ericsson's outlook for the global network market to be "flattish" in 2008.

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