Swedish equipment vendor Ericsson said Thursday the effects of the global economic recession on the global mobile network market are so
far limited. However, its handset business is a drag and falling currencies in some areas have translated into a slowing in spending for some carriers, making for an overall profit drop of about 30 percent.
“We have started the year with good growth ahead of the market and a positive margin trend but with a weaker cash flow,” said Carl-Henric Svanberg, president and CEO of Ericsson. “Sales of network infrastructure are stable and the demand for professional services is growing.”
During the quarter, Ericsson has won a contract for 3G at China Unicom, LTE for Verizon Wireless and managed services for Vodafone UK.
“Most operators ... have healthy financial positions, there is a strong traffic growth and the networks are fairly loaded,” Svanberg said. “It remains difficult to more precisely predict how operators will act in the current environment. However, investment in wireless networks largely continues, and rollouts of new networks and new technologies accelerate in markets such as the U.S., China and India.”
Ericsson reported sales for the first quarter of $6.2 billion, a 12 percent increase compared to the same period last year. Net income however was 30 percent lower than the 2.6 billion Swedish kronor the company reported in the first quarter last year.
Profit took a hit thanks to weakening earnings in its joint ventures. On April 17, Sony Ericsson reported a $390 million loss for the first quarter – a sign that handset sales continue to weaken even as networks are built out. Yesterday, ST-Ericsson, a new joint venture between STMicroelectronics and Ericsson to make chips for handsets, reported a net loss of US $89 million for the first two months of its existence and 1,200 job cuts.
Svanberg sought to reassure investors: “Telecom plays a critical role for growth and development of societies, and fixed and mobile broadband rollouts are now on political agendas in most countries.”
