Ericsson's net sales drop in Q2

Fri, 07/23/2010 - 8:15am
Monica Alleven, Wireless Week

Ericsson's net sales, at $6.58 billion, decreased by 8 percent in the second quarter, and operating income declined by 12 percent year-over-year. 

"Over the past years, we have gone through major changes with cost reductions and strengthened portfolio and market presence while maintaining our technology leadership. The cost reduction program, initiated in the first quarter 2009, has been completed, reaching its target. Going forward, cost and capital efficiency will remain top of our agenda," said Ericsson President and CEO Hans Vestberg.

Ericsson says its North American sales increased 128 percent year-over-year and 37 percent sequentially, with mobile data growth spurred by the launch of smartphones by all leading carriers. Ericsson started volume deliveries of 4G/LTE in the second quarter.

While tight spending keeps holding back equipment sales, Ericsson's diversification into services is showing further progress, says IHS Global Insight telecom analyst Aapo Markkanen in a research note. Sales of network gear also were hit by component shortages, but the professional services business grew by 5 percent in the second quarter.

Ericsson also announced a deal with Telefonica, and it won its largest managed services contract in China, but it was beaten in the United States to the contract with Harbinger Capital's LTE wholesale network, which went to Nokia Siemens Networks.

ST-Ericsson, a joint venture formed by Ericsson and STMicroelectronics, reported lower sales, but its restructuring plans are on track ,and it managed to mitigate the impact of the lower level of revenues on its operating loss. Net sales came in at $544 million, a 10 percent sequential decrease.

Earlier this month, Ericsson's other joint venture, handset maker Sony Ericsson, reported its second consecutive quarter of profit.

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