(updating with regional performance, contribution of Sony Ericsson)
STOCKHOLM (Thomson Financial) - LM Ericsson AB reported a third quarter pretax profit of 5.583 bln skr, down 37 pct from 8.868 bln a year earlier, hit by a sharp fall in margins.
Sales increased 6 pct to 43.545 bln skr from 41.271 bln.
Operating margin fell to 12.9 pct from 21.2 pct, and gross margin to 35.6 pct from 38.2 pct.
The results were the same as released in the company's comprehensive profits warning of last week.
'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 build outs,' said chief executive Carl-Henric Svanberg.
'Our networks business continues to develop most rapidly where new buildouts and break-in contracts are predominant and pricing pressure most intense,' he added.
For 2007, Ericsson reiterated its forecast for the GSM and WCDMA track within the global mobile systems market, measured in US dollars, 'to continue to show mid-single digit growth'.
It also reiterated its forecast for the addressable market for professional services to show 'good growth' in 2007.
Ericsson slightly revised the regional sales growth figures given in conjunction with its profits warning.
In Western Europe, it said sales increased 6 pct from a year earlier driven by managed services and increased demand for broadband. Sales of mobile networks in the region were 'down somewhat' the company said, due to lower than expected sales of upgrades and expansions, particularly in the UK and Italy.
Growth in Central and Eastern Europe, Middle East and Africa showed growth of 10 pct driven by network rollouts and expansions.
Sales in Asia Pacific were flatish with growth of just 3 pct, due to lower mobile systems sales in China.
'The underlying business activity is ongoing at a stable level, but invoicing varies quarter by quarter due to the nature of the Chinese market,' said Ericsson.
North American and Latin American sales were also up 3 pct and 1 pct respectively.
Sony Ericsson contributed 1.7 bln skr to Ericsson's third quarter pretax profit, down from 2 bln skr a year earlier. This means the handset division accounted for 30 pct of group third quarter profit. simon.richardson@thomson.com sjr/cw/sjr/cw COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2007 AFX News
