Thursday, April 21, 2016

Ericsson Q1 Sales Drop 2% YoY, Profitability Rises

Ericsson reported Q1 sales of SEK 52.2 billion (US$6.42 billion), down 2% compared to the same period last year. Net income amounted to SEK 2.1 billion, up 45% from SEK 1.5 billion in Q1 2015. Gross margin declined despite higher IPR licensing revenues. The main reasons were lower margins in Global Services, a higher share of mobile broadband coverage projects in parts of Asia and lower software sales in IP and core networks.

Some highlights:

  • Segment Networks sales declined slightly YoY. A continued weak macro-economic environment impacted sales negatively in some emerging markets in the Middle East and Latin America. In addition, sales in Europe were down primarily driven by completion of mobile broadband projects in 2015. Mobile broadband sales in North America and South East Asia grew and the fast pace of 4G deployments in Mainland China continued. IPR licensing revenues grew YoY, mainly driven by recently signed contracts which included certain one-time items. Software sales in IP and core networks declined.
  • Sales in segment Global Services declined YoY. This was mainly due to lower Network Rollout activities in Europe and Latin America. Professional Services sales were stable with growth in Consulting and Systems Integration driven by transformation projects and stable Managed Services sales with 21 contracts signed in the quarter.
  • Sales in Support Solutions increased YoY due to higher IPR licensing revenues. The underlying demand remains strong in OSS and BSS as data growth and increased focus on customer experience drives operators to transform their OSS and BSS solutions.
"We are not satisfied with our overall growth and profitability development over the past years and I am convinced this will make us more competitive and enable us to grow both our company and our earnings," stated Hans Vestberg, President and CEO of Ericsson.