Hans Vestberg, president and CEO of Ericsson, today presented a bleak second half for the telecom network vendor.
“As previously stated and with current visibility, key contracts awarded will gradually impact sales and business mix in the second half of the year,” Vestberg said.
Ericsson Q2 2014 revenue dipped 1 percent to $8.02 billion (SEK 54.8 billion), while net income rose 76 percent to $395 million (SEK 2.7 billion). The company said it would continue to focus on improving its profit.
The profit margin of Ericsson has slightly improved to 7.3 percent in Q2 2014 from 4.5 percent in Q2 2013 and 5.5 percent in Q1 2014.
Recently, ZTE, the second largest telecom network vendor in China, said it is improving profit thanks to its 4G infrastructure business – primarily from China.
Ericsson showed SEK -9.1 billion as its investment in R&D against SEK – 7.7 billion, showing its weak financial position.
A seven percent dip in global services revenue was the main reason for the marginal growth in second quarter revenue.
Ericsson said growth in the Middle East, China and India, as well as continued capacity business in North America has contributed to sales in Q2.
Out of SEK 54.8 billion, Ericsson generated SEK 29 billion from networks, SEK 23.1 billion from global services and SEK 2.8 billion from support services.
Network biz
Ericsson’s network business grew 3 percent to SEK 29 billion. The growth was driven by Middle East, China, US and India. The majority of sales growth was in Radio Access. In addition, IP Edge and IMS solutions showed good growth.
Capacity business developed favorably also this quarter, particularly in advanced LTE markets, driven by operators’ focus on network performance as a key differentiator. The decline in mobile broadband coverage projects in North America and Japan continued as expected.
Global services
Ericsson’s global services revenue decreased 7 percent to SEK 23.1 billion. The decline was due to reduced mobile broadband network roll out activities in North America and Japan. Professional services sales remained stable.
Ericsson said Managed Services continues to show high business activity and sales grew q-o-q. During the quarter, several new contracts were announced, including a 5-year managed services deal in Romania involving more than 700 employees moving to Ericsson.
Global services sales increased q-o-q driven by increased activities in North America, impacting both Professional Services and Network Rollout.
Where’s the Future?
Ericsson said 4G/LTE contracts in North America, Mainland China and Taiwan, significant improvement in the investment climate in India, its modems business that can create revenue in 18-24 months, will be the key for future business.
Baburajan K
[email protected]
