Sunday, January 24, 2010

Ericsson's Sales Decline, More Job Cuts Seen

Ericsson's sales in Q4 2009 declined 16% year-over-year for comparable units, i.e. excluding the recently acquired Nortel CDMA and LTE business in North America, and decreased 20% adjusted also for currency exchange rate effects and hedging.
For the full year, sales for comparable units were stable but decreased 9% adjusted for currency exchange rate effects and hedging. Decreased sales in Networks were not fully offset by increased sales in Professional Services. Net income amounted to SEK 0.7 (4.1) b. in the quarter. For the full year, net
income was SEK 4.1 (11.7) b. and earnings per share were SEK 1.14 (3.52).

"During the second half of 2009, Networks' sales were impacted by reduced operator spending in a number of markets. Group sales for the full year were less affected and the operating margin increased slightly," commented Hans Vestberg, President and CEO of Ericsson. "We maintained market shares well in all segments, cash flow was good and our financial position is strong. The services business performed well, and our joint ventures remain on track to return to profit."

Some highlights for Q4 2009:

NETWORKS: Networks' sales in the quarter declined by -16% year-over-year. Full year sales declined by -3%. The mobile infrastructure market share was maintained well in 2009. During the second half of 2009, Networks' sales were impacted by reduced operator spending in a number of markets. Currency exchange rate effects had a positive impact on sales for the full year due to a strong USD in the beginning of 2009. Compared to the all-time-high GSM volumes in 2008, volumes decreased and are not yet offset by increased sales of WCDMA and initial rollouts of LTE. The IP-router business developed well during the year and the common core part of the recent LTE win with TeliaSonera is based on Ericsson's SmartEdge IP platform.

PROFESSIONAL SERVICES: Professional Services sales in the quarter were flat year-over-year. Organic growth
in local currencies amounted to 2%. Managed services sales in the quarter increased by 19% year-over-year and by 22% for the full year. Sales for the second half of the year were negatively impacted by the reduced scope in a
managed services agreement in Italy as well as somewhat lower volumes in project-related services. At the same time, sales in the second half were positively impacted by the contract with Sprint in the US.

MULTIMEDIA: multimedia sales in the quarter for comparable units, i.e. adjusted for the divestment of the PBX and mobile platform operations, decreased year-over-year by -14% mainly due to tough comparison with a strong fourth quarter 2008 and somewhat slower sales of revenue management solutions in several emerging markets. However, TV and multimedia brokering (IPX) continued to show good development. The combined strength of the business support systems (BSS) offering and the strong services portfolio is generating increased operator interest.

Ericsson said its cost reduction program announced in January 2009 has already resulted in the elimination of 5,000 jobs, about 1,000 in Sweden. The target of 5,000 job cuts has been exceeded and is now estimated to reach approximately 6,500.