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Ericsson Profit Surges On Sony Ericsson Divestment Gain - Update

Ericsson Profit Surges On Sony Ericsson Divestment Gain - Update
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4/25/2012 2:44 AM ET

Swedish telecom equipment maker LM Ericsson Telephone Co. (ERIC: Quote) on Wednesday reported a surge in profit for the first quarter, as the results benefited from a hefty gain related to divestment of the company's 50 percent stake in Sony Ericsson joint venture. Sony has bought out Ericsson's stake in the years-long partnership.

In the first quarter, Ericsson's net income attributable to stockholders climbed to 8.95 billion Swedish kronor ($1.33 billion) or 2.76 kronor per share from 4.10 billion kronor or 1.27 kronor per share in the prior year.

The results included a gain of 7.7 billion kronor from Sony Ericsson divestment.

Non-IFRS earnings per share, excluding this gain, amounted to 0.77 kronor for the recent quarter, down from last year's 1.61 kronor.

Net sales for the quarter decreased 4 percent to 50.97 billion kronor from 52.97 billion kronor in the comparable period last year. Sales for comparable units, adjusted for foreign exchange and hedging, decreased 6 percent year over year.

Sales from Networks declined 18 percent to 27.3 billion kronor. The company suffered an expected major decline in CDMA sales as well as lower operator network spending in regions with macro-economic or political uncertainty.

Sales of high-performance mobile broadband developed well in North America, Japan and Korea, while Europe including Russia, parts of Middle East and India were weaker.

Global Services revenues increased 18 percent in the quarter to 20.6 billion kronor, mainly driven by consulting and systems integration in professional services.

Support Solutions clocked a 33 percent sales growth at 3 billion kronor, driven by good development in TV and multimedia brokering. The integration of Telcordia is progressing as planned, Ericsson said.

At ST-Ericsson, its JV with ST Microelectronics, net sales plunged 35 percent due to an expected drop in sales of new products to one of the largest customers as well as the usual seasonal effect and continued decline in legacy products. Net income declined 75 percent.

Geographically, sales dropped 3 percent in North America, but increased 20 percent in Latin America. Northern Europe and Central Asia recorded a 32 percent drop.

Gross margin declined to 33.3 percent from 38.5 percent. The company attributed the year-over-year decline to increased services share, network modernization projects in Europe and a higher proportion of coverage projects.

Ericsson said its underlying business mix, with higher share of coverage and network modernization projects than capacity projects, was unchanged in the first quarter and is expected to prevail short-term.

The stock closed in Stockholm on Tuesday higher by 3.24 percent at 63.60 kronor on 13.04 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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