Ericsson’s Q4 results reflect global market jitters

Ericsson today warned of short-term challenges as operators remained cautious with their spending plans, as a result of factors including macro-economic and political uncertainty.

The world’s leading telecom infrastructure vendor is already seeing the effects of this, with its fourth quarter profit falling by 66 per cent as spend shifted to lower margin projects. Net income fell to SEK1.5 billion (US$220 million) from SEK4.4 billion a year earlier, on revenue of SEK63.7 billion, up one per cent. Gross margin decreased to 30.2 per cent from 36.6 per cent.

In a statement, Hans Vestberg, president and CEO, said that the fourth quarter drop was a result of “weaker development in Networks, as well as an expected gross margin impact from a changed business mix with more coverage projects, modernisation projects in Europe, and a higher services share.”

The company noted pressure in North America and Russia, where there was slower operator spending after a period of high investments in capacity. It also noted increased cautiousness due to economic development and political unrest in some countries.

For the full year, net income increased by 12 per cent to SEK12.6 billion, on revenue of SEK226.9 billion, also up 12 per cent. During this period, software represented 23 per cent of sales, hardware 40 per cent, and services 37 per cent.

Ericsson also saw weaker results from its joint ventures, ST-Ericsson and Sony Ericsson. Ericsson is expected to complete the sale of its stake in Sony Ericsson to Sony imminently. Separately, ST-Ericsson has warned of tough times to come, as a result of reduced demand from a major customer.

Ericsson also noted that following the completion of its Telcordia acquisition, “we have also gained a leadership position and skilled people in the important areas of operating and business support systems.”