Ericsson quarterly profit defies sluggish sales

Swedish telecom giant Ericsson on Wednesday announced a drop in sales but posted a sharp rise in first-quarter profit, which nonetheless fell shy of analyst predictions.

Ericsson quarterly profit defies sluggish sales
Ericsson CEO Hans Vestberg at the first quarter press conference. Photo: TT
Analysts had forecast stronger sales as Asian and European mobile operators expanded high-speed data networks, but the Dow Jones newswire pointed to Ericsson's continued flat sales in Western Europe in the first quarter.
Ericsson partly attributed its sales drop to large North American projects tapering off.
"The main reason is … lower revenues from two large mobile broadband coverage projects in North America … and the impact from reduced activity in Japan," chief executive Hans Vestberg said in a statement.
"This was partly offset by growth in China, Middle East and Latin America."
Despite sluggish sales, net profit leaped by 75 percent to 2.12 billion kronor ($323 million) compared to the 1.2 billion kronor profit in the same period in 2013. Last year, the company faced large restructuring costs.
The increase since then fell slightly short of analysts' expectations, however. Polled by Dow Jones Newswires, market observers had predicted a net profit of 2.38 billion kronor.
Revenue dropped by 8.7 percent to 47.5 billion kronor compared to a year earlier.
The group reported a 5.5 percent operating margin up from 4 percent, thanks to "a large share of mobile broadband capacity projects with higher hardware margins" and lower restructuring charges, which weighed on the profit of the company a year ago.
The agreement Ericsson signed with South Korean electronics giant Samsung, settling a global patent dispute, had "positive effects" and also weighed positively on first quarter figures, the company stated.
"Through our technology and services leadership we are well positioned to continue to stay relevant as our customers move to capture new market opportunities," Vestberg said.
Ericsson shares dropped by 4.75 percent in early afternoon trading on the Stockholm Stock Exchange in an overall market down 0.86 percent.

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