Network equipment sales declined due to lower demand in current tougher market environment, says CEO
Wireless equipment maker has reported sales of SEK46.4 billion, down 5.6% compared to SEK49.2 billion in the same period last year.
Sales in the quarter decreased 4% year-over-year for comparable units, and decreased 12% adjusted for currency exchange rate effects and hedging. Sequential sales decreased 11%, negatively impacted by currency exchange rate effects, seasonality and a reduced scope of the renewed managed services agreement in Italy.
The gross margin remained flat sequentially, and decreased slightly year-over-year to 36.2% (37.0%). Operating expenses amounted to SEK11.6 billion in the quarter excluding restructuring charges. Operating income excluding joint ventures and restructuring charges amounted to SEK5.5 billion, resulting in a slightly improved operating margin of 11.7% (11.5%). The margin was stable sequentially when adjusted for a capital gain of SEK0.8 billion in the second quarter 2009.
For the quarter ended September 30, net income was SEK810m, down 71% compared to SEK2.84 billion in the same period a year ago.
Carl-Henric Svanberg, president and CEO of Ericsson, said: Sales of network equipment declined due to lower demand in the current tougher market environment. Despite lower volumes, network margins remain stable. The strong development in professional services continued. Our cost reduction activities are running ahead of plan with further opportunities for efficiency improvements and savings.”
During the quarter, network sales declined 8% year-over-year, while professional services sales increased 9% compared to the same period a year-ago. Adjusted cash flow amounted to SEK6.9 billion, compared to SEK2.7 billion in the same period last year.
Mr Svanberg said that the economic climate affects the global mobile infrastructure market and the credit environment is still tight in several emerging markets. However, he added that other markets, including the economies such as China, India, US and Japan show good development.