Revamp dampens Ericsson profits

Swedish telecom equipment maker Ericsson on Wednesday posted a drop in first quarter profit, weighed down by restructuring costs.

Revamp dampens Ericsson profits

Net profit fell 86.5 percent to 1.2 billion kronor ($182.6 million) from 8.95 billion kronor in the same period last year, when the company recorded a 7.7 billion kronor gain on the sale of its stake in mobile phone venture Sony Ericsson.

The company also took a 1.4 billion kronor hit from restructuring its Swedish operations.

The results were boosted by a 23-percent rise in North American sales, but a high portion of sales from low-margin maintenance contracts in Europe weighed on profits.

“The negative impact from the network modernization projects in Europe will continue to gradually decline during 2013,” CEO Hans Vestberg said in a statement.

“With present visibility of customer demand, and current global economic development, we continue to believe that the underlying business mix will start to gradually shift towards more capacity projects during the second half of 2013.”

Capacity increase contracts are normally more profitable than network upgrade projects.

Revenue rose two percent to 52.032 billion kronor even as the company faced currency headwinds, underpinned by rising sales in the Networks and Global Services units, Ericsson said.

Analysts polled by Dow Jones Newswires had expected a net profit of 1.8 billion kronor and revenue of 52.52 billion.

“While macroeconomic and political uncertainty continues in certain regions, the long-term fundamentals in the industry remain attractive,” Vestberg said.

Shares in Ericsson were down 0.45 percent in early afternoon trading on the Stockholm stock exchange, which was trading 0.75 percent lower.

AFP/The Local/at

Follow The Local on Twitter

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Ericsson suspends all Russia operations indefinitely

Swedish network equipment maker Ericsson said Monday that it was suspending all of its Russian operations over the war in Ukraine for the foreseeable future.

Ericsson suspends all Russia operations indefinitely

The telecom giant already announced in late February that it would stop all deliveries to Russia following Moscow’s February 24 invasion of Ukraine.

“In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely,” Ericsson said in a statement.

The company added that it was “engaging with customers and partners regarding the indefinite suspension of the affected business.”

“The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave,” it said.

READ ALSO: How has Sweden responded to Putin’s war in Ukraine so far?

Hundreds of Western firms ranging from Ikea to Coca-Cola, Goldman Sachs and McDonald’s have stopped operations in the country since the invasion, with French banking group Societe Generale announcing Monday it was selling its stake in Russia’s Rosbank.

Ericsson has around 600 employees in Russia, and is a “major supplier to the largest operator MTS and the fourth largest operator Tele2,” a company spokeswoman told AFP, adding that together with Ukraine, Russia accounts for less than two percent of revenue.

As a result, the equipment maker said it would record a provision for 900 million Swedish kronor ($95 million, 87 million euros) for the first quarter of 2022 for “impairment of assets and other exceptional costs,” though no staff redundancy costs were included.
Ericsson is due to publish its first quarter earnings on April 14.