Despite Thursday that sales dropped by 4 percent, Sony Ericsson retained both – the operating profit and margins at the same level as last year. Restructuring costs and shares in subsidiaries, Sony Ericsson and ST-Ericsson, however, weighs down the result as the last line stopped at 800 million Swedish kroons.
More savings measures are to be expected when the product portfolio will be further rationalized.
There are mixed messages in Ericsson’s latest quarterly report.
On the one hand, sales decreased by 4 percent, from 49.2 billion the same quarter last year to 46.4 billion kronor. And profits of the last line was 0.8 billion, compared with 2.9 billion the same quarter last year.
It is the core business – sales of network equipment – which failed during the quarter. The tough economic climate means that operators, especially outside the industrialized countries, has been difficult to borrow money for investment. Interestingly, the climate seems to beat harder to older technologies such as GSM. Ericsson points out that the decrease of GSM sales have not offset by growth in mobile broadband.
On the other hand, have seen over the first nine months, Ericsson has actually managed to increase its sales of network equipment with few percent. And service element goes from strength to strength, it grew by 9 percent during the past quarter and has so far this year has grown by total of 21 percent. Service component is almost half the size of the network part – last quarter, Ericsson sold 13 billion for services and network equipment to 30 billion.
The third business area, cherished Multimedia, seems to be difficult to lift. Sales last quarter of 3.4 billion is on the same level as last year and have only moved marginally during the year.
The restructuring costs are still high, 2.7 billion kronor in the quarter, and the whole 7 billion so far this year. But Ericsson points out that saving program quicker than planned, and that the transition to IP technology provides fewer software platforms and products with less hardware, which makes you promise to get more synergy. “This will lead to further cost savings associated with restructuring charges in the remaining three quarters” the company writes in the report.
One of Ericsson’s biggest change this year is the success in North America. The service agreement with Sprint, where Ericsson takes over network operation and large number of employees. the deal with Nortel, which is expected to finally be implemented next quarter, and orders from Verizon, AT & T, Metro PCS enables Ericsson to take the step to become the leading telecommunications provider in the North America.
On the positive is that the losses of the affiliated subsidiaries ST-Ericsson and Sony Ericsson has decreased since last quarter. This quarter, the outcome was charged with 1.5 billion, of which Sony Ericsson accounted for the lion’s share. But Sony Ericsson’s new President Bert Nordberg has previously said that he aims for profit next year.