Ericsson Q2: Sales hit by mixed operator investment, components shortage

Ericsson (NASDAQ: ERIC) saw its profits double in the second quarter but analysts were disappointed with the vendor's sales numbers. The company's sales declined 7.9 percent to $6.5 billion down from $7.05 billion on a net profit of $260 million. Ericsson said that the market conditions the company saw in the second half of 2009 with mixed operator investment behavior prevailed in the first half of this year. In addition, a shortage of components hampered the vendor's ability to ship base stations.

"There was some mixed operator investment opportunities across the world," said CFO Jan Frykhammer in an interview. "Some operators are investing more in data growth."

Frykhammer said Ericsson managed to ramp up the inbound supply for semiconductor components during the quarter despite a severe shortage of components and shipped base stations in volume late in the quarter, which impacted the vendor's balance sheet. "We will continue to be impacted throughout the year, and we're working hard to improve that," he said.

Frykhammer reiterated that the long-term prospects of the industry are strong given the significant growth potential of mobile broadband services.

The North American market was a bright spot for the Swedish firm with sales increasing 128 percent year-over-year and 37 percent sequentially. The growth was attributed to strong data growth which meant operators increased their investments in network capacity. In addition, during the quarter Ericsson said it started volume deliveries of LTE equipment, most likely to Verizon Wireless (NYSE:VZ), which plans to launch 25 to 30 markets by the end of the year. Ericsson and Alcatel-Lucent are Verizon's radio access network vendors for LTE.

For more:
- see this FierceWireless article
- see this Wall Street Journal article (sub. req.)
- check out the FierceWireless Q2 earnings page

Related articles:
Ericsson's Q1 profit slides on weaker sales
Smartphone success boosts Sony Ericsson's result
Ericsson, Alca-Lu score LTE deal with AT&T
Ericsson slashing 1,500 more jobs amid restructuring

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