Wednesday, October 21, 2009

Ericsson Reports Fall in Network Equipment Sales, Rise for Professional Services

Ericsson reported Q3 sales of SEK 46.4 billion, down 4% year-over-year for comparable units, i.e. excluding Ericsson Mobile Platforms, and down 12% adjusted for currency exchange rate. Sequential sales decreased 11%, negatively impacted by currency exchange rate effects, seasonality and a reduced scope of the renewed managed services agreement in Italy. The lower year-over-year sales in Networks and Multimedia were partly offset by stronger sales in Professional Services.

Ericsson said the rapid growth in demand for mobile broadband continues although the growth does not yet offset this year's lower demand for GSM.

"Sales of network equipment declined due to lower demand in the current tougher market environment. Despite lower volumes, Network margins remain stable. The strong development in Professional Services continued," stated Carl-Henric Svanberg, President and CEO of Ericsson.

The gross margin, was flat sequentially despite the lower sales, and decreased only slightly year-over-year to 36.2% (37.0%). The year-over-year change is largely attributable to the sales mix, with a higher proportion of network rollout and professional services, efficiency gains and some currency exchange rate effects.