Sunday, October 19, 2008

Ericsson Reports Strong Sales for Q3, up 13% YoY

Ericsson reported strong financial results for Q3 2008. Sales were up 13% year-over-year to 49.2 billion, mainly driven by healthy growth in Networks across all regions except Western Europe. In constant currencies, growth amounted to some 17%. However, the company said it is planning for a "flattish" market in 2009 and also planning in case tougher market conditions develop.

"Our business in the quarter has not been impacted by the financial turmoil. Our customers are generally financially strong. In addition, networks are loaded and traffic shows strong increase. In the present financial turmoil, it is however hard to predict how operators will act and to what extent consumer telecom spending will be affected," said Carl-Henric Svanberg, President and CEO of Ericsson. "Gross margin increased year-over-year and was stable sequentially. We are seeing initial positive effects from our ongoing cost adjustments. Our financial position is strong with healthy net cash and high payment readiness".

Some highlights for the quarter:

  • Gross margin, excluding restructuring charges, amounted to 37.0% (35.6%) and was stable sequentially. The year-over-year improvement reflects a better business mix outside Western Europe and improved margins in Professional Services.

  • Operating expenses, excluding restructuring charges, amounted to SEK 12.9 (12.0) b. in the quarter. Operating expenses decreased sequentially affected by seasonality and some initial effects of the cost adjustments.

  • Operating income, excluding restructuring charges, amounted to SEK 5.7 (5.6) b. in the quarter. Sony Ericsson showed a small profit, excluding restructuring charges. Excluding Sony Ericsson, Group operating margin improved year-over-year to 11.5% (9.0%).

  • Sales in Networks were up 16% year-over-year and 5% year-to-date. Network rollout services grew in line with equipment sales. Build-out of new networks as well as network expansions across all markets except Western Europe continues with particularly strong growth in India, Indonesia, Russia and Brazil,. Margins improved sequentially as well as year-over-year due to improved business mix and lower operating expenses.

  • Redback shows strong sales growth as a result of increased international sales while sales in the US were down.

  • Sales in Professional Services grew by 7% both year-over-year as well as year-to-date. Adjusted for the transfer of IPX and local currencies, sales growth amounted to 11% year-to-date. Operating margin improved sequentially, as a result of efficiency gains and a lower proportion of new managed services contracts in early phase.

  • Compared to a strong third quarter 2007, managed services sales increased year-over-year by 3% and by 13% year-to-date. During the quarter, six new contracts were signed. The total number of subscribers in managed operations now amount to 225 million, of which 60% are in high-growth markets.

  • Sales growth was 10% year-over-year and 16% year-to-date. Organic growth, excluding acquisitions and divestitures, amounted to 23% year-over-year. Revenue management, including LHS, and Tandberg Television showed particularly strong development.

See also