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Telecommunications equipment industry

Ericsson Posts Small Profit Rise, Forecasts Moderate Growth

Strategic Insights

— 1 min read

Telecom equipment maker Ericsson has posted a small rise in third-quarter profits, boosted by a record performance from its mobile phone joint venture, Sony Ericsson. The company's CEO, Carl-Henric Svanberg, said the quarter was a success due to successful phone launches, but cautioned that strong results may not be repeated in the future. Ericsson's sales were below forecast, but the company expects moderate growth in the market for GSM and WCDMA technology next year.

Key Takeaways:

  • Ericsson's third-quarter pretax profit rose to 8.8 billion Swedish crowns (pounds 637.6 million), excluding one-off items, and 8.9 billion crowns (pounds 644.9 million) including one-offs.
  • The company's joint venture, Sony Ericsson, reported a pretax profit of 433 million euros (pounds 292.5 million), twice as much as expected.
  • Ericsson's third-quarter sales were 40.8 billion crowns (pounds 2.95 million), below a forecast 41.8 billion crowns (pounds 3.02 billion) and 44.2 billion crowns (pounds 3.2 billion) in the second quarter.
  • The company expects moderate growth in the market for GSM and WCDMA technology in 2007, similar to 2006 growth.
  • Sony Ericsson, owned jointly with Sony Corporation, has become the world's fourth-largest mobile phone maker after five years in existence.
  • Ericsson has benefited from demand for equipment for services such as mobile broadband, but has also experienced strong price pressure in network equipment.
  • The company's restructuring costs related to the acquisition of Marconi included 1.4 billion crowns (pounds 101.4 million) to lay off 1,600 staff at the former UK telecoms company.

Statistics:

  • Third-quarter pretax profit: 8.8 billion Swedish crowns (pounds 637.6 million), excluding one-off items, and 8.9 billion crowns (pounds 644.9 million) including one-offs.
  • One-off items: 2.2 billion crowns (pounds 159.4 million) of restructuring costs related to the acquisition of Marconi, including 1.4 billion crowns (pounds 101.4 million) to lay off 1,600 staff at the former UK telecoms company.
  • Third-quarter sales: 40.8 billion crowns (pounds 2.95 million).
  • Forecast for 2007 growth: moderate growth in the market for GSM and WCDMA technology.
  • Sony Ericsson's pretax profit: 433 million euros (pounds 292.5 million), twice as much as expected.

Sources:

  • Ericsson's third-quarter report
  • Sony Ericsson's pretax profit report
  • Nokia's quarterly report
  • Reuters

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