Mobile broadband drives sales for Ericsson
Things are looking up for Ericsson. The company reported an 8 percent year-over-year increase in group sales in the fourth quarter, mainly driven by strong development in mobile broadband.
Sales growth returned in the second half of the year, and net income increased 172 percent, due mainly to improvements in earnings in its Sony Ericsson joint venture and less restructuring charges, the company said.
During a press conference in Sweden this morning, Ericsson President and CEO Hans Vestberg said data traffic continues to grow in North America, whether it be CDMA, HSPA or LTE, and Ericsson is supplying to all the major operators here. It's also one of the key partners for Sprint's network evolution strategy.
Network modernization projects, along with 3G rollouts in India, are putting pressure on gross margin, but the company says those projects are important for long-term growth and profitability.
In an interview, CFO Jan Frykhammar said the company's balance sheet, when compared to, say, a year ago, is "stronger," but there's still work to be done. That includes a continued focus on increasing efficiencies, which involves everything from upselling of products to work with subcontractors or third parties.
Ericsson enjoyed brisk mobile broadband sales, including radio, backhaul and evolved packet core, in the quarter, especially driven by markets like the U.S. and Japan. The company will continue trying to strengthen its position in the U.S. and Korea, but when asked about signs of recovery in the global markets, Frykhammar said there are certain parts of Europe that remain big questions marks, namely Ireland, Spain, Portugal, Greece and possibly the U.K. A year and a half ago, the talk was of the global financial crisis, but now there are new regulations regarding banks' lending practices that impact companies' growth, among other things.
Asked whether Ericsson expects to see significant demand for its products from tablets in North America, he replied: "I certainly hope so." But despite all the tablets released at CES earlier this month, smartphones continue to grow and Ericsson must make sure it has the ecosystem to support those as well as tablets. Many operators in the United States also are looking to M2M for growth and increasingly using the cloud to deliver services, which also will impact growth.
As for its joint ventures, Sony Ericsson improved its results year-over-year, but ST-Ericsson's loss increased slightly year-over-year.