Thursday, January 31, 2008

Ericsson: Mobile Sales Growth Slowed in 2007, 3.3 Billion Mobile Users Worldwide

During 2007, Ericsson experience a rapid build out of mobile communications in emerging markets along with a decline in network expansions and upgrades in mature markets, resulting in lower overall margins. The year-over-year sales for Q4 2007 were flat due to less spending from operators on network infrastructure and a continued weakened USD. About 50% of sales are USD related. For the full year, the sales increase amounted to 4%. In constant currencies, estimated organic growth was 8%.

Operating income amounted to SEK 7.6 (12.2) b. in the quarter and SEK 30.6 (35.8) b. for the full year. Operating expenses amounted to SEK 15.2 (13.2) b in the quarter as a consequence of seasonality and newly acquired companies.

Some highlights from the company's financial report:

  • Sales in Networks declined by 4% in the quarter, year-over-year. For the full year sales grew by 1%. During the second half of 2007, sales were affected by the shift from capacity expansions and software upgrades to new network buildouts. This shift in business mix, as well as the rollout of new switching technologies, has negatively affected gross margin. Network rollout services increased 61% sequentially, reflecting the higher proportion of large network buildout projects.

  • Redback has significantly increased its international sales over the year through leveraging Ericsson's global sales organization. In the US, however, Redback saw a decline in business from one major customer which impacted domestic sales. Redback full year sales grew slightly.

  • Sales in Professional Services grew by 15% in the quarter year-over-year and by 16% for the full year. Growth in constant currencies amounted to 19% and 16% respectively. Managed services and systems integration showed the fastest growth. Operating margins remained

  • Sales growth amounted to 7% in the quarter year-over-year and 14% for the full year. Operating margin in the quarter was negative 9% and just below break-even for the full year. Multimedia is in a build-up phase. It includes areas with good growth and healthy margins as well as new areas with significant investments, and sales and results fluctuate.

  • At the end of 2007, Ericsson had 74,000 employees worldwide, including 19,800 in Sweden. This compares with 63,800 at the end of 2006, including 19,100 in Sweden.

Ericsson estimates the Mobile Subscriptions worldwide grew by some 150 million in Q4 2997 to a total of 3.3 billion. 180 million are WCDMA subscriptions, up by close to 20 million in the fourth quarter.

There are now 197 WCDMA networks in 87 countries, of which the large majority is being upgraded to HSPA.

Uptake in data traffic accelerates quickly, and in 3G networks monitored by Ericsson total data traffic now exceeds voice traffic.

In the twelve-month period ending September 30, 2007, fixed broadband connections grew with 24% to some 320 million.