Ericsson's rebound

28 Apr 2008

It's a relief surely to find Ericsson back on track. If the world's biggest wireless vendor can't turn a dollar, what hope is there for the rest of us‾

As it is, Ericsson remains the only profitable telecom vendor outside China. Its Q1 result was steady, not stellar, with sales up just 5% and operating income down 47%.

But the markets liked it, sparked a 17% rise in stock price last Friday.

The result shows Ericsson has recovered from its October surprise when it unexpectedly announced a 36% cut in earnings - a problem, many believe, due more to its reporting system than its underlying business. In any case, it now has a new CFO and tighter reporting.

As you'd expect, network sales were driven by GSM expansion in emerging markets such as India. Its services division, now its second largest group, boosted sales by 8%.

But the real positive was the 39% growth in North America, mostly from WCDMA and HSPA upgrades. With the spectrum auction over, bidders are now prepping for mobile broadband rollouts in coming years.

That, the impending Chinese telecom reforms and 3G upgrades elsewhere, will be the biggest market drivers in 2008, Ericsson believes.

For all that, CEO Carl-Henric Svanberg says the company is planning for "a flattish mobile infrastructure market in 2008".

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