Swedish telecom firm Ericsson AB (ERIC) Wednesday reported a plunge in first-quarter profit as the prior-year results included a hefty gain from the divestment of Sony Ericsson.
Adjusted for this gain and restructuring charges related to the reduction of operations in Sweden, profitability improved, mainly due to higher sales in Networks and a continued reduction in operating expenses.
Hans Vestberg, President and CEO of Ericsson, said, "Sales showed positive development in the quarter with a growth of 2% YoY, despite currency headwind...The sales increase was primarily driven by Networks and rollout services, following high project activities primarily in Europe and North America."
Net income attributable to stockholders of the parent company plunged to 1.205 billion Swedish kronor ($0.18 billion) from 8.95 billion kronor a year ago. The year-ago results included a gain of 7.7 billion kronor from the divestment of Sony Ericsson.
Operating income before shares in earnings of JV and associated companies plunged 80 percent to 2.138 billion kronor. Shares in earnings of JV and associated companies plummeted 98 percent to 32 million kronor.
Sales grew 2 percent to 52.03 billion kronor from 50.97 billion kronor, despite currency headwind. For comparable units and adjusted for forex and hedging, sales rose 7 percent year-over-year.
Networks sales rose 3 percent to 28.1 billion kronor, primarily driven by North America and South East Asia.
Sales were up 4 percent in Global Services at 21.5 billion kronor, driven by Network Rollout.
Support Solutions sales dropped 19 percent to 2.4 billion kronor mainly due to the divestment of Multimedia Brokering in the third quarter of 2012 and negative currency impact.
Vestberg added that North America remained the strongest region and showed a growth of 23 percent despite the decline in CDMA.
North East Asia had a challenging quarter and sales declined 41 percent, with lower sales in South Korea, continued structural decline in GSM investments in China and forex effects in Japan.
Cost of sales rose 4 percent to 35.39 billion kronor and operating expenses advanced 2 percent to 14.52 billion kronor.
The stock is up 0.1 percent in early morning trade at 77 kronor.
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