Ericsson Profits Plummet
In stark contrast to the healthy Nokia second quarter figures which we featured yesterday, Ericsson have reported that their second quarter profits fell by a whopping 70%. The loss was put down to the cost involved in cutting jobs and the fall in sales of mobile phones made by their Sony Ericsson joint venture.
Although there was a 2 percent rise in revenue during the quarter, net income dropped to $320 million from $1.07 Billion compared to a year ago.
The performance of Ericsson sales in Western Europe was mixed, with Western Europe declining year-by -year. There was sales growth in the Baltic and Nordic markets however, but lower business trade in other European markets like Spain and the UK offset any profits. Although business activity is high with the rollout of 2G networks in rural areas of Eastern Europe and the Middle East there was also a downturn in sales in both of these areas.
Asia Pacific sales were down 5% overall, but there were some positives in the region. Excluding Japan and Australia, there was actually a 6% rise in sales in the region. India was a market that showed extremely strong growth and with new networks being rolled out on a continuing basis this is a region where a continued high level of growth is expected.
Like rivals Nokia, Ericsson reported increased sales figures in Latin America. Sales rose by 21% in the region with development being strong in Brazil, Mexico and Chile. The continued expansion of 3G in the region due to high demand looks to be the key to sales and a continued growth is expected in the region.
Due to an increase in the demand for mobile broadband and related services, the US showed a large increase of sales and were up by 47%.
With such a downturn in profits it may all look doom and gloom for Ericsson, but the company say there is a continued growth in the fixed and mobile broadband subscriptions and that momentum for HSPA is good all around the world.
“The overall business activity shows stable development,” said Carl-Henric Svanberg, President and CEO of Ericsson. “With no major changes in the market environment, we still find it prudent to plan for a flattish mobile infrastructure market in 2008 and our focus on adjusting our cost base remains.”
The next set of figures for the third quarter should make interesting reading and we’ll have to wait and see if the optimistic view the company has portrayed will indeed be a reality.
