Ericsson's Q1 profit slides on weaker sales

Ericsson's (NASDAQ: ERIC) net first-quarter profit slumped 26 percent, bruised by weaker sales in emerging markets and continued restructuring charges.

Ericcson Q1 slidesThe world's largest equipment vendor reported net profit of $174.4 million, down from $238.8 million in the year-ago period. The company's sales fell 9 percent--the same as reported by rival Nokia Siemens Networks on Thursday--to $6.26 billion, weaker than the $6.88 billion it had in the first quarter last year. However, the company's gross margin jumped to 39 percent, up from 36 percent in the year-ago period.

Ericsson said operators in a number of developing markets remained cautious on spending, which impacted its networks business. In an interview with FierceWireless, Ericsson CFO Jan Frykhammer said sluggish operator spending started in 2009 and likely won't improve overnight. Nevertheless, he said the company is seeing strong growth from operators in regions of the world, such as North America, where mobile broadband data is exploding. "Voice capex declined, but mobile broadband data capex increased," he said.

The Swedish company added that solid sales in its services business partly offset the decline in network sales. Ericsson's sales in China were down 15 percent and sales in India slipped 43 percent. 

Frykhammer said the company's integration of Nortel Networks' CDMA business is going very well. "CDMA customers started to show confidence when we purchased Nortel's assets, and that is a good thing for the business. We also acquired a design team with LTE skill sets. This is very important," he added.

Ericsson also said in its earnings release that it signed 16 managed services contracts with operators in the quarter. The company scored a coup in February when AT&T Mobility (NYSE: T) selected it alongside Alcatel-Lucent (NYSE: ALU) as the primary vendors for its LTE network; Ericsson has won similar deals with Verizon Wireless and MetroPCS in the United States so far.

For more:
- see this FierceWireless Q1 earnings page
- see this release
- see these Q1 earnings slides
- see this WSJ article (sub. req.)
- see this FT article

Related Articles:
Ericsson to shy away from M&A, will focus on services
Ericsson, Alca-Lu score LTE deal with AT&T
Ericsson slashing 1,500 more jobs amid restructuring
Ericsson names new services, CDMA chiefs
Dell'Oro: Ericsson bounds ahead of rival vendors in Q4

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