Ericsson reports changed business mix and lower income
Ericsson discloses the information provided herein pursuant to the Swedish Securities Exchange and Clearing Operations Act and/or the Swedish Financial Instruments Trading Act. The information was submitted for publication at 07.30 CET, on October 25, 2007.]
Net sales SEK 43.5 (41.3) b. in the quarter, up 6%, SEK 133.3 (125.6) b. first nine months
Operating income SEK 5.6 (8.8) b. in the quarter, down 36%, SEK 23.0 (23.6) b. first nine months
Operating margin 13% (21%) in the quarter, 17% (19%) first nine months
Cash flow from operations SEK -1.6 (4.8) b. in the quarter, SEK 7.2 (7.5) b. first nine months
Net income SEK 4.0 (6.2) b. in the quarter, down 36%, SEK 16.2 (16.5) b. first nine months 2)
Earnings per share SEK 0.25 (0.39) in the quarter, SEK 1.02 (1.04) first nine months 2)
CEO COMMENTS
"The sharp decline in profit this quarter is mainly due to weaker sales of mobile network upgrades and expansions combined with continued high sales of new network buildouts," said Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). "This changed business mix within Networks affected Group margins negatively. All other businesses performed as expected.
Our networks business continues to develop most rapidly where new network buildouts and break-in contracts are predominant and pricing pressure is most intense. This has so far been offset by higher margin sales of software, expansions and upgrades to our installed base. While we expect such higher margin sales to gradually resume, new network buildouts will continue to weigh on Networks' margins for several quarters.
The Professional Services segment continued to show strong growth and stable margins. The Multimedia segment also showed a strong growth with operating income slightly above breakeven level, reflecting the mix of businesses with healthy margins and investments in new business areas.
In infrastructure, scale is critical for success. In this period of vendor consolidation, we have chosen to secure our scale advantage in mobile networks through organic growth. This strategy has been effective but comes at a certain cost. Now that we have reestablished our scale advantage we will now capitalize on our gains and leading position," said Carl-Henric Svanberg.
Net sales SEK 43.5 (41.3) b. in the quarter, up 6%, SEK 133.3 (125.6) b. first nine months
Operating income SEK 5.6 (8.8) b. in the quarter, down 36%, SEK 23.0 (23.6) b. first nine months
Operating margin 13% (21%) in the quarter, 17% (19%) first nine months
Cash flow from operations SEK -1.6 (4.8) b. in the quarter, SEK 7.2 (7.5) b. first nine months
Net income SEK 4.0 (6.2) b. in the quarter, down 36%, SEK 16.2 (16.5) b. first nine months 2)
Earnings per share SEK 0.25 (0.39) in the quarter, SEK 1.02 (1.04) first nine months 2)
CEO COMMENTS
"The sharp decline in profit this quarter is mainly due to weaker sales of mobile network upgrades and expansions combined with continued high sales of new network buildouts," said Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). "This changed business mix within Networks affected Group margins negatively. All other businesses performed as expected.
Our networks business continues to develop most rapidly where new network buildouts and break-in contracts are predominant and pricing pressure is most intense. This has so far been offset by higher margin sales of software, expansions and upgrades to our installed base. While we expect such higher margin sales to gradually resume, new network buildouts will continue to weigh on Networks' margins for several quarters.
The Professional Services segment continued to show strong growth and stable margins. The Multimedia segment also showed a strong growth with operating income slightly above breakeven level, reflecting the mix of businesses with healthy margins and investments in new business areas.
In infrastructure, scale is critical for success. In this period of vendor consolidation, we have chosen to secure our scale advantage in mobile networks through organic growth. This strategy has been effective but comes at a certain cost. Now that we have reestablished our scale advantage we will now capitalize on our gains and leading position," said Carl-Henric Svanberg.
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