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Ericsson Q1 stumble

April 23, 2015

Ericsson has reported an unexpected fall in profits as infrastructure spending by MNOs in the North American market remained slow and fierce competition affected margins elsewhere.

While sales in China were up as build-outs of new networks there gather pace, Ericsson’s overall operating profits in the first quarter fell, weighed down by the lower margins in Asia.

Ericsson said fast-rising data traffic would mean a further need for upgrades of network infrastructures in North America, where the build-out of top clients AT&T and Verizon’s 4G broadband networks is now largely complete.

“However, with current visibility, we anticipate the fast pace of 4G deployments in Mainland China to continue and the North American mobile broadband business to remain slow in the short term,” the company said in a statement.

Operating profit in the quarter fell to 2.1 billion Swedish crowns ($240 million) from 2.6 billion in the same period last year. Revenue at its Networks unit, which accounts for just over half of sales, fell 9 per cent on a like-for-like basis after a 7 per cent drop in the fourth quarter.

Total sales in the first three months of 2015 rose by 13 per cent to 53.5 billion crowns, in line with expectations and boosted by the stronger dollar. However, the company said like-for-like sales were down 6 per cent. The gross margin was 35.4 per cent, short of the average forecast of 37.1 per cent.

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