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Ericsson sales suffer despite mobile data traffic rises

Ian Grant

More mobile data traffic and network operators' attempts to manage that traffic better were not enough to save Swedish telecommunications equipment maker Ericsson from reporting a 9% fall in revenue over 1Q09 to SEK45.1bn (£4.1bn) for 1Q10.

CEO Hans Vestberg said sales for comparable units, adjusted for currency exchange rate effects and hedging dropped 16% year-on-year.

Voice-related sales, such as 2G, continued to slide but were partly offset by increased 3G sales, he said. Sales were also hit by tight industry component supplies.

Earlier job losses and greater efficiencies improved gross margin to 39% from 36%, and cash flow turned positive year-on-year, he said. "The work to regain profitability in our joint ventures is on track and (mobile phone maker) Sony Ericsson shows improved results year-on-year," he said.

Tight market conditions from 2009 continued, leaving network operators in some developing markets cautious. This was offset somewhat by the increase in mobile data traffic in North America and Western Europe, driven by increased consumer usage of smartphones and other devices.

"We forecast that mobile data traffic will double annually over the next five years," Vestberg said. This growth had helped Ericsson to sign 16 managed services contracts during the quarter. This reflected increased operator focus on network quality and efficiency, Vestberg said.

Vestberg said Ericsson was strengthening its position in North America with the "important" 4G/LTE agreement with AT&T. "With a clear roadmap for CDMA, customers show confidence in our broadened offering," he said.

First quarter Fourth quarter
SEK b. 2010 2009 Change 2009 Change
Net sales 45.1 49.6 -9% 58.3 -23%
Gross margin 39% 36% - 35% -
EBITA margin excl JVs1) 13% 12% - 15% -
Operating income excl JVs 4.5 4.7 -4% 7.5 -39%
Operating margin excl JVs 10% 10% - 13% -
Ericsson's share
 
in earnings in JVs -0.3 -2.2 - -0.4 -
Income after financial items 4.1 3.3 23% 6.7 -38%
Net income 1.3 1.8 -30% 0.7 76%
EPS diluted, SEK 0.39 0.54 - 0.10 -
Adjusted cash flow2) 3.0 -1.7 - 13.6 -
Cash flow from operations 2.3 -2.9 - 12.5 -
Restructuring charges excl JVs 2.2 0.7 - 4.2


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