Thursday, April 24, 2008

Ericsson Beats Estimates in Q1, Professional Services Grows 8%

Ericsson posted Q1 2008 net sales of SEK 44.2 billion, up 5% over last year, and net income of SEK 2.6 billion, down 55% year over year. The company reported steady demand for mobile infrastructure, especially in high-growth markets, sayings sales are picking up in the US while Western Europe remains slow. The proportion of new network builds in high-growth markets, especially in India, is increasing. A weaker USD put pressure on margins.

"The rollout of mobile broadband continues throughout the world. HSPA will be the dominant standard for many years and is now an effective alternative to fixed broadband. Mobile broadband will play a significant role in bridging the digital divide. Furthermore, it is encouraging that LTE, the evolution of HSPA, is supported by the largest operators around the world. We are investing significantly in this technology to secure leadership also in this area," said Carl-Henric Svanberg, Ericsson's CEO.

Some highlights by the company's divisions:

  • Networks -- Sales in Networks grew by 2% year-over-year despite a negative impact from the USD decline. The sales increase was driven by increased sales of GSM in high-growth markets, especially in China and India. The demand for GSM remains healthy and the business activity is increasing, particularly in India and China. 3G rollouts are ongoing throughout the world, including major rollouts in Russia and Latin America. The largest proportion of R&D investments in Networks is spent on WCDMA and an increasing part on LTE. Several major operators have announced plans to upgrade their networks to 14.4 Mbps and Ericsson will introduce 21 Mbps during the second half of the year. Redback has significantly increased its sales outside the US through leveraging Ericsson's global sales organization. Since the acquisition, Ericsson has signed agreements for the delivery of Redback-based solutions with more than 100 carriers in over 65 countries.

  • Professional Services -- Sales in Professional Services grew by 8% year-over-year with a growth in constant currencies of 10%. As expected, managed services sales decreased sequentially with the reduced scope of the 3 UK contract announced in the fourth quarter 2007 but increased 20% year-over-year.

  • Multimedia
  • --Sales growth amounted to 16% year-over-year, largely driven by acquisitions. The business activity has been high in the quarter with important reference contracts in IPTV as well as increased traction in Tandberg Television.

    Sales and operating income for mobile platforms were negatively affected by approximately SEK 0.3 b. in the quarter following Sony Ericsson's lower sales in the first quarter.