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Ericsson profits fall

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10:30 CEST+02:00
Ericsson, the world's biggest supplier of mobile telecommunication systems, reported Friday a slight drop in second-quarter net profit as the acquisition of British group Marconi in 2005 continued to weigh on earnings.

The Ericsson share shed ground in early trading on the Stockholm stock exchange, losing 1.31 percent to 22.60 kronor as analysts blamed the drop in profits on the Marconi deal.

"Marconi's obviously not performing. Sales are slower than hoped and costs are higher," said one analyst who asked not to be identified.

However, earnings were on the whole higher than analysts had expected.

The Swedish company posted a net profit of 5.73 billion kronor, down from 5.79 billion in the same quarter a year ago.

Counted per share, earnings came in at 0.36 kronor compared to 0.37 a year earlier.

Sales rose by 15 percent to 44.1 billion kronor, but were below analysts' forecasts of 44.8 billion, while operating profit, which fell one percent to 8.25 billion kronor from 8.30 billion, was ahead of the market's expectation of 7.80 billion.

The operating margin, a number watched closely by the market, fell by 2.9 points to 18.7 percent, but was higher than analysts' expectations of 17.4 percent.

The figure came in at 19.6 percent when stripped of amortization of intangible assets related to Marconi.

Analysts said the company's earnings were bolstered by mobile phone maker Sony Ericsson's 1.0-billion-kronor contribution, which was 200 million kronor more than expected and up from 400 million kronor a year earlier.

Sony Ericsson's forecast-beating results were released last week.

Ericsson meanwhile forecast "moderate" growth for its main markets, measured in US dollars.

Chief executive Carl-Henric Svanberg said ongoing consolidation in the telecommunications business was "natural" and was being driven by the need for critical mass in research and development, marketing and supply.

He said Ericsson's strategy remained based on organic growth and bolt-on acquisitions, adding the company was well positioned to gain market share.

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