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Ericsson’s Q3 weighed down by overseas sales slump

Fri, 10/26/2012 - 3:24pm
Maisie Ramsay, Wireless Week

Ericsson's third-quarter results took a hit as weak sales in Asia, the European financial crisis and its loss-making chip venture weighed down earnings.

The Swedish infrastructure vendor saw sales slip 2 percent year-over-year to $8.12 billion, as declines in its key networks business offset gains in its services and support units.

Operators in Europe reduced capital spending in response to ongoing macroeconomic problems, and wireless providers in the key markets of India and China also cut network investments.

Profits dropped 42 percent to $327.4 million, from $565.6 million, as margins slid on low-priced contracts for equipment in Europe.

"Overall, we are not satisfied with the profit levels we have right now and will continue to work on costs and efficiency gains," Ericsson CFO Jan Frykhammar said in an interview. Those cost reductions could come in the form of job cuts across some of the 180 countries where Ericsson does business, he said. "We increase and decrease headcount – we need to do that, being a global business."

The United States remained strong for Ericsson, where it has LTE contracts with AT&T, Verizon Wireless, Sprint and T-Mobile USA, among others. The company has sought to expand beyond equipment sales into services and support, a plan boosted through its 2011 acquisition of Telcordia. It is also purchased Canadian carrier-grade Wi-Fi company BelAir Networks this year in a bid to get ahead of demand for small cells.

ST-Ericsson, the company's chip joint venture with STMicroelectronics, continued to be a burden, losing $84 million. However, the losses were less severe than last year. ST-Ericsson agreed with its parent companies in April to lower its break-even point and focus on a smaller number of important product launches.

Frykhammar said that Ericsson still views the chip company as strategically important, even though it has hired an external advisor to go over its "strategic options" for ST-Ericsson.

Ericsson exited its handset joint venture with Sony last year.

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