Why Ericsson displays disappointing revenue in Q3

Ericsson revenue analysis for Q3 2015
Telecom network vendor Ericsson on Friday said its revenue in Q3 2015 rose 2.63 percent to SEK 59.16 billion or $6.95 billion.

On quarterly basis, Ericsson revenue fell 2 percent.

While reported sales increased 2.63 percent, sales, adjusted for comparable units and currency, fell 9 percent, due to lower sales in networks. Networks sales decreased mainly due to lower business activity in Russia, Japan and the Middle East.

Reported sales in Ericsson networks business decreased 4 percent. Sales, adjusted for comparable units and currency, decreased by 15 percent — mainly due to lower sales in the Middle East, North East Asia as well as in Northern Europe and Central Asia. Sales declined in Radio, partly offset by sales growth in Microwave and IP routing.

Revenue contribution from telecom networks business was 49 percent, global services generated 46 percent revenue and support solutions the balance 5 percent.

Ericsson observed lower business activity in Japan, Russia and Brazil.

Ericsson said SEK 14,355 million (+2 percent) came from North America, SEK 5,610 million (-5 percent) from Latin America, SEK 2,520 million (-20 percent) from Northern Europe & Central Asia, SEK 4,540 million (-2 percent) from Western & Central Europe, SEK 5,470 million (+5 percent) from Mediterranean, SEK 5,728 million (-5 percent) from Middle East, SEK 2,691 million (+10 percent) from Sub Saharan Africa, SEK 3,629 million (+81 percent) from India, SEK 6,348 million (-10 percent) from North East Asia and SEK 4,750 million (+25 percent) from South East Asia & Oceania.

Sales growth remained strong in India as well as in South East Asia and Oceania, while sales declined in North East Asia as well as in Northern Europe and Central Asia.

The mobile broadband business in North America remained stable q-o-q, but at a lower level compared to the same period last year.

There was a slowdown of the 4G deployments in Mainland China. There was also slower pace of mobile broadband investments in certain markets such as Russia, Brazil and parts of the Middle East which had a weak macro development.

“We also saw a somewhat slower pace of mobile broadband investments in markets such as Russia, Brazil and parts of the Middle East which had a weak macro development. Professional Services sales increased by 15 percent, with double-digit growth in eight out of ten regions,” said Hans Vestberg, president and CEO of Ericsson.

Ericsson said its strategic growth initiatives build on a combination of excelling in core business and establishing leadership in targeted growth areas.

“We see continued good progress in these areas which had a sales growth of more than 10 percent. In targeted growth area TV & Media, it added two important customers in North America. Ericsson signed deal to acquire Envivio, a software-based video encoding company,” said Vestberg.

Michael Soper, telecom analyst at Technology Business Research, said Ericsson’s market presence is small in growth areas, but increasing in line with the size of the addressable market. The company’s strategy is to advance core areas through organic investment and growth areas through a combination of organic development and targeted acquisitions.

Baburajan K
[email protected]

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