Ericsson shares fall despite profits hike

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Ericsson shares fall despite profits hike

Swedish telecom firm Ericsson has reported a net profit of 2.16 billion kronor for the second quarter 2013, news which sent the firm's stock tumbling by almost 5 percent in early trading on Thursday.


"We are not satisfied with profitability, but it is gradually improving," said Hans Vestberg, President and CEO of Ericsson in a statement.

Sales were flat at 55.3 billion kronor, unchanged from a year earlier. Operating profit excluding share of profit from joint ventures, was 2.5 billion kronor, compared with 3.3 billion in the corresponding period of 2012.

Despite the climb in profits, the result came in under analyst expectations who had predicted that operating profit would total 4.3 billion, according to Reuters. Analysts furthermore predicted sales of 56.3 billion kronor, more than a billion higher than the outcome.

Earnings were negatively impacted by non-recurring items for a total of 900 million, related to losses through divestitures and exits from telecom and power cable operations, the firm explained in its report.

The strong krona negatively impacted on sales results in some markets and adjusted for foreign exchange sales in fact climbed seven percent with Ericsson's business reporting growth in most parts of the world.

"Six of the ten regions grew in this quarter. North America continued strong, Western Europe grew by ten percent and Southeast Asia grew. The areas where we did not grow, which are tough, were north-east Asia," Vestberg said.

The reason behind the development is that 2G investments in China, previously important for the firm, are declining while 4G is yet to begin. The Japan market was beset by currency problems and South Korean 4G market suffered delays.

Ericsson reported that it is investing heavily in television and media and the firm plans to acquire two companies engaged in providing TV services, such as technology solutions for IPTV.

"Much of the consumption in the network is the TV and media. We see the merger of telecom, television and media, and there Ericsson wants to grab a number one position. We are number one in mobile infrastructure and would also like to have a strong position in television and media," Hans Vestberg said.

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