Ericsson's Q1 profit triples

Michael Carroll and Dylan Bushell-Embling
28 Apr 2011
00:00

Ericsson has reported a 220% jump in net profit for the first quarter, in a result attributed to strong demand for mobile broadband.

Profit increased to 4.1 billion kronor ($675.8 million), from 17% higher net sales of 53 billion kronor.

Ebitda margin improved to 14.1% from 12.8% in 1Q10, while gross margin stayed flat at 38.5%.

But while Ericsson said its first-quarter sales were not impacted by the Japanese earthquake and tsunami, the company warned it could take until the third quarter to shake off the supply chain issues the disasters have caused.

But the company's joint venture with ST Microelectronics, ST-Ericsson, generated a $24 million higher loss during the period as sales of new equipment failed to take up the slack of lower shipments of legacy kit.

The joint venture blames a restructuring program for a higher-than-expected fall in sales that led to losses growing to $178 million during the period.

When combined with a regular seasonal sales dip, the result was a $162 million drop in revenues year-on-year to $444 million.

President and chief Gilles Delfassy acknowledged sales fell short of the firm’s forecasts for the quarter, but drew some comfort from the fact that new products, including a high-speed modem, continued to contribute more to overall revenues.

“In the midst of these financial results, our main focus remains on improving efficiency and security the successful execution and delivery of our new products,” he explained.

However the turnaround isn’t on the horizon. The firm predicts a further fall in sales due to the disparity between old and new products in the second quarter.

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