Ericsson profits lower than expected

Ericsson, the world's biggest supplier of mobile telecommunication systems, has reported net profit of 4.6 billion kronor in the first quarter, unchanged from the same period last year.

The results were worse than expected, mainly due to the costs of integrating Britain’s Marconi, which Ericsson acquired last year, but chief executive Carl-Henric Svanberg said that he was satisifed.

“We think this is a very good report,” he said in an interview with TT.

Sales increased to 39.2 billion kronor from 31.5 billion, largely thanks to growth in the group’s services segment, which has been boosted by a need for operators to cut ownership costs, the company said.

“Through our early lead in services we have gained a strong position with an exciting growth potential,” said Svanberg.

Pretax profit, at 6.7 billion kronor, was well short of analysts’ expectations of around 7.5 billion kronor however, and the operating margin, at 16.9 percent, was also below forecasts of 18.9 percent.

While welcoming services turnover growth, analysts noted that profit margins in that sector are smaller than in the core network equipment business.

Svanberg also warned that there would still be further costs of integrating Marconi.

“It could take a quarter or so longer than we expected at the beginning to push the whole programme through,” he said to TT.

Ericsson said it expected the global mobile network systems market to show “moderate growth”, which analysts said probably meant between five and 10 percent.

Long-term industry growth remained solid, driven primarily by emerging markets, Svanberg said.

“The mobile phone is often the only means to communicate in emerging markets, and demand is therefore high also for advanced data services,” he said.

Asia-Pacific sales grew by 44 percent, mostly owing to growth in Australia, India, Indonesia and Japan. China, meanwhile, was “still in a waiting mode” ahead of a forthcoming decision on third-generation mobile technology, he said.

Sales were up by 13 percent in western Europe, by 21 percent in central and eastern Europe, the Middle East and Africa, and by 58 percent in North America. In Latin America sales growth was three percent.

Worldwide mobile phone subscriptions grew by 100 million in the first quarter, and Ericsson said it expected global subscriptions to pass the three billion mark sometime next year.

AFP/TT/The Local