Pressure on Ericsson as profits fail to be impressive
Thursday, 24 October 2013
Ericsson's profitability has failed to lift expectation as was reported
on Tuesday. At the same time the telecom company's turnover fell
as "The sale is under some pressure," says CEO Hans Vestberg.
“Sales for comparable units, adjusted for FX, grew 3percent. Reported
sales were slightly down YoY, primarily due to continued currency
headwind,” said Hans Vestberg, President and CEO of Ericsson.
“We are currently seeing sales coming under some pressure. In
addition to FX, the major drivers for this development are the two
large mobile broadband coverage projects, which peaked in North America
in the first half of 2013. We also saw impact from reduced activity in
Japan where we are getting closer to completion of a major project.
The 4G/LTE tenders in China continue and so far two of the major
operators have made their choices. Despite having insignificant market
share for 3G, Ericsson has been named technology partner for both these
operators and we will now build on this initial footprint.
The pace is picking up in the European market with continued
WCDMA/LTE investments and a major investment announcement by one of the
large operators. Ericsson now sees growth in several European markets
and margins are also improving as the network modernization projects
gradually come to an end and we engage more in new capacity and LTE
The momentum for Professional Services continued with stable earnings
and 59 signed managed services contracts year to date. As a result of
our continuous work to implement global processes, methods and tools to
increase efficiency, Global Services margins improved during the
Profitability for the group continued to improve YoY, partly offset by
currency headwind.The improvement was driven by higher gross margin due
to less dilutive impact from European network modernization and
somewhat improved business mix.
During the quarter Ericsson has continued to strengthen its market
leadership. In September we launched a small-cell product, the Ericsson
Radio Dot System, for indoor coverage. The new product opens up new
revenue opportunities for operators and initial customer response has
been very positive. In addition, we closed the acquisition of Mediaroom
which places Ericsson as the world’s largest IPTV player, by market
The macroeconomic climate has stabilized in many OECD markets.
However, uncertainty still remains in certain parts of the world. The
long-term fundamentals in the industry remain attractive and we are
well positioned to continue to support our customers in a transforming
ICT market,” concludes Vestberg.
Ericsson's full report could be found here
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