Ericsson reports slow second quarter
Published:23-July-2007
By BR staff writer
A flat quarter in Europe and shrinking sales in North America left Ericsson just shy of analysts forecasts for the second quarter. However, it said it is sticking to its forecast that GSM/WCDMA sector of the market will show mid-single-digit growth for the year.
The Stockholm, Sweden-based company, which has led the rest of the industry with its push into services, predicted that this sector of the market will show "good growth" for 2007.
In the second quarter to June 30 it increased net income by 13.6% to SEK 6.5bn ($980m) on sales up 6.4% at SEK 47.6bn ($7.17bn). Flat sales of SEK 12.4bn ($1.86bn) in western Europe were blamed by the company on a temporary delay in orders while carriers held discussions on sharing infrastructure. CEO Carl-Henric Svanberg said there are 40 or 50 carriers in Europe compared with four or five in the US.
Sales fluctuations between quarters were given as the reason for an equally flat picture in central and eastern Europe, the Middle East, and Africa. Sales in North America fell 18% to SEK 3bn ($451.7m) after a 31% fall in the first quarter. Asia Pacific has been the boom area for the company with sales up 32% at SEK 16.6bn ($2.49bn), driven by continuous expansion in the most dynamic market for mobile telephony. In Latin America sales rose 7% to SEK 3bn ($617m).
In terms of the sales mix, network sales, which grew 7% to SEK 33.7bn ($5bn), remained the biggest sector. But professional services showed 11% growth to SEK 10.3bn ($1.5bn), and managed services, which provide a stable source of revenue to balance irregular equipment sales, rose 21% to SEK 2.9bn ($436m).
Multimedia sales, up 6% to SEK 3.6bn ($542m), were still modest but this has been the area most fortified by Ericsson's recent acquisitions of Tandberg, Mobeon, Drutt, and LHS and so should provide a new engine for growth.
With a claimed 40% market share in the GSM/WCDMA sector, Ericsson is best qualified to benefit as data takes over from voice as the key factor determining when carriers upgrade their networks.
