Ericsson profits rise 500%

Michael Carroll
26 Jan 2011

Ericsson grew profits a massive 504% year-on-year to 4.4 billion Swedish Kronor ($673.9n) in 4Q10, as its handset joint venture returned to profitability and component shortages in the networks business eased.

The strong showing helped the firm to a full year profit of 11.2 billion Kronor - up 172% on 2009 – as sales dipped a marginal 2% to 203.3 billion Kronor on the back of slightly higher R&D and operating expenses.

While the networks business benefitted from growing sales of mobile broadband kit, president and CEO Hans Vestberg admitted 2G equipment sales to fuel network expansions in China played a major role in a 40% sequential rise during 4Q10 to 36.4 billion Kronor.

Vestberg noted that component shortages that blighted the infrastructure business in 2010 eased in the final three months of the year, but said the firm is still not fully matching demand for some mobile broadband kit.

However, Vestberg said the firm has “established a clear lead,” in 4G and LTE kit, adding that it will seek to “strengthen our position in key markets such as the US and Korea,” while maintaining its focus on network upgrades.

The firm’s handset joint venture Sony Ericsson last week reported its first profitable year since 2007 with a net profit of €8 million in 4Q helping the business to a full-year profit of €90 million compared to a loss of €836 million in 2009.

However higher operating expenses at the firm’s ST-Ericsson joint venture resulted in losses growing from $125 million (€91 million) in 4Q09 to $177 million in the most recent quarter.

Currency exchange fluctuations and the components shortage caused a marginal 1% year-on-year fall in Global Services sales to 22.9 billion Kronor in 4Q; managed services sales grew 5% to 5.4 billion Kronor; and multimedia sales increased 3% to 3.5 billion Kronor.

Despite the growth in profits, the figure came in just under analyst’s forecasts of 4.84 billion Kronor, the Wall St Journal said.

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