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Ericsson's profits surge on mobile broadband demand

Wed, 04/27/2011 - 8:15am
Malin Rising, The Associated Press

STOCKHOLM (AP) – Ericsson says profits more than tripled in the first quarter, driven by continued strong demand for mobile broadband.

Net profit for the three-month period jumped to 4.1 billion kronor ($673 million), from 1.3 billion kronor a year earlier.

The company, based in Stockholm, said revenue for the period increased by 17 percent to 53 billion kronor from 45.1 billion with gross margin staying flat at 38.5 percent.

The result beat the expectations of 23 analysts polled by SIX Estimates, who had forecast sales of 48.5 billion kronor and a gross margin of 37.4 percent. Shares in Ericsson rose by 7 percent to 86.10 kronor ($14.13) in early Stockholm trading.

Ericsson, which builds wireless networks for mobile phone operators worldwide, said the strong demand for mobile broadband resulted in five out of 10 regions showing growth year-over-year. Countries with especially strong growth were the U.S., India, Japan, South Korea and Russia.

China had continued good momentum for second-generation networks, it added.

Greger Johansson, an analyst with research firm Redeye, said the results were "very strong," mainly because Ericsson's network business performed better than expected.

"This shows growth is taking off in the telecommunications sector and will probably continue for a while," he said.

The only cloud on the horizon for coming quarters is the potential supply chain effects of the earthquake and tsunami in Japan, he added.

With more than 90,000 employees worldwide, Ericsson is the industry leader but is facing competition from Nokia Siemens and China's Huawei in the networks industry.

Ericsson gets a smaller share of its income from its Sony Ericsson joint mobile phone venture — which last week reported a 48 percent drop in net profit to euro11 million ($15.8 million) for the first quarter, down from euro21 million a year ago.

Ericsson President and CEO Hans Vestberg said the company continued to gain market share in third-generation mobile equipment in 2010 and "at least maintained" its share of more than 50 percent in fourth-generation equipment.

"Group sales in the quarter increased by 17 percent year-over-year driven by continued strong demand for mobile broadband and especially for the multi-standard radio base station RBS 6000," Vestberg said.

The company said sales in the first quarter were not impacted by the devastating earthquake and tsunami in Japan, but said its supply chain of components is partly dependent on Japan which could result in delivery delays going forward.

"We have taken a number of actions to mitigate the effects to secure that we limit the impact on our customers," Vestberg said. "Our best estimate is that we will be able to deliver the majority of these volumes before end of third quarter 2011."

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