Ericsson's Q4 profit rises as mobile broadband demand surges

Ericsson's (NASDAQ:ERIC) fourth-quarter profit rose on the back of strong sales, which topped analysts' estimates, as demand for mobile broadband surged, especially in North America.

The Swedish vendor said net income in the quarter rose to $656.6 million in the quarter, up from $47.7 million in the year-ago period, when the company's earnings took a hit because of restructuring charges. Ericsson, the world's largest equipment vendor, posted sales of $9.6 billion, up 7.6 percent from $8.86 billion in the fourth quarter of 2009. Ericsson's sales beat an estimate of $9.04 billion, according to analysts surveyed by Bloomberg.

"Mobile data traffic is forecast to almost double annually over the coming years," Ericsson CEO Hans Vestberg told the Wall Street Journal. "We are well positioned to support our customers in meeting the changing consumer behavior."

Ericsson said that networks sales in the quarter were $5.53 billion, up 14 percent from the year-ago period. The company said that mobile broadband sales, including radio, backhaul and evolved packet core sales, increased in the quarter, driven by the U.S. and Japanese markets. Voice sales remained weak, the company said.

Additionally, the vendor said component supply normalized in the quarter, but that Ericsson is still not able to meet increasing demand for mobile broadband products. Component shortages hampered vendors for much of last year. "We managed to improve output from the factories quite significantly and managed to catch up quite a lot on the hardware side," Ericsson CFO Jan Frykhammar said in an interview with FierceWireless. "The comparison levels from when we went into the situation to where we are now, we have improved a lot. But we do have a bit of a challenge to meet the customer demand."

In North America, Ericsson sales increased 49 percent year-over-year. The company noted that in 2010 it became the largest player in the region, driven by organic growth as well as the acquisition of assets from Nortel Networks. Ericsson is one of the primary LTE vendors for Verizon Wireless (NYSE:VZ) and MetroPCS (NYSE:PCS), and also benefited from its managed services deal with Sprint Nextel (NYSE:S). Sprint also picked Ericsson as one of its vendors for its multi-year network modernization project, along with Alcatel-Lucent (NYSE:ALU) and Samsung. 

"Going into next year, it will be difficult from a comparison point of view to have the same fantastic growth rate," Frykhammar said, referring to the U.S. market. "We should be humbled about that and realistic as well." However, he added that growing mobile data traffic from smartphone and tablets will benefit Ericsson, as well as the acceleration of LTE deployments. AT&T Mobility (NYSE:T), which plans to launch LTE by mid-year, is using gear from Ericsson and Alcatel-Lucent.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this FierceWireless Q4 earnings page

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