STOCKHOLM (dpa-AFX) - Swedish telecom equipment major LM Ericsson Telephone Co. (ERIC) reported Wednesday a sharp decline in second-quarter profit, hurt mainly by lower margins. Results reflected lower profitability in Network and a wider loss in ST-Ericsson.
Hans Vestberg, president and CEO of the company said, 'In the quarter, demand for Global Services and Support Solutions was strong, while Networks sales decreased YoY mainly due to the expected decline in CDMA equipment sales as well as lower business activity in China, including weaker sales of GSM and lower 3G sales in Russia.'
Networks sales dropped 17 percent from last year and operating margin was 5 percent, down from 14 percent a year earlier. Also, Ericsson's gross margin was 32 percent, lower than 37.8 percent reported a year ago.
Net sales from Global Services increased 26 percent and Support Solutions sales were up 47 percent from last year. The company said its Global Services and Support Solutions together represented about half of its revenues.
Further, the company stated that ST-Ericsson, its JV with ST Microelectronics, is still in a challenging situation due to a significant drop in sales of new products to one of its largest customers and continued decline in legacy products.
In the second quarter, the company's net income attributable to stockholders plunged to 1.11 billion Swedish kronor (about $0.16 billion) or 0.34 kronor per share from 3.12 billion kronor or 0.96 kronor per share ion the previous year.
Non- IFRS earnings per share, excluding restructuring, were 0.78 kronor, significantly lower than 1.60 kronor per share a year ago.
Net sales for the quarter grew 1 percent to 55.32 billion kronor from 54.77 billion kronor in the same quarter last year. Sales increased 9 percent from the previous quarter. Sales for comparable units, adjusted for foreign exchange and hedging, decreased 6 percent year-over-year.
Geographically, sales increased 5 percent in North America, and was up 6 percent in Latin America. Northern Europe and Central Asia recorded a 26 percent drop.
Ericsson also said its underlying business mix, with higher share of coverage projects, was unchanged in the quarter and is expected to prevail short-term.
In Stockholm, the shares are currently trading at 56.55 kronor, down 3.99 percent, on a volume of 8.02 million shares.
Copyright RTT News/dpa-AFX