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Ericsson Net Surges 73% Rollout of 3G Services in Europe Buoys Sales

http://www.rednova.com/news/display/?id=146093&source=r_technology

Ericsson, the Swedish telecommunications equipment giant, reported a surge in profit on Friday, extending a recent run of positive news from the telecommunications industry and buoying European stock markets. The Stockholm-based company, the world's largest supplier of mobile phone networks, said that net income for the first quarter increased 73 percent to 4.64 billion kronor, or $661 million, from a year earlier. Sales were up 12 percent at 31.5 billion kronor, as Ericsson rolled out 3G services in Western Europe, and as demand for WCDMA, a high-speed transmission technology, rose in Eastern Europe and Turkey.

Market share increased 2 percent to 3 percent from a year ago, a sign that the company's strategy of closer partnering with its customers was working, said Carl-Henric Svanberg, the company's president and chief executive. Ericsson has also focused on cutting costs in recent quarters, particularly by eliminating jobs. These cuts helped to increase the company's gross profit margins from 44.7 percent a year ago to 48.5 percent in the first quarter of 2005, beating analysts expectations. "These guys are still the biggest player in the telecom equipment environment anywhere, and economies of scale are playing into their hands," said Robert Sellar, head of technology on the equities desk of Aberdeen Asset Management.

In recent years, investors and analysts predicted sales would drop steadily for well-established telecommunications equipment companies like Ericsson, as Chinese manufacturers took over the industry. But they failed to take into account the amount of spending that these companies' customers need to do to improve their existing networks to support 3G and other new technologies, Sellar said. Ericsson's news comes on the heels of unexpectedly strong reports from Nokia, the German business software company SAP and Motorola. The Ericsson report is also in sharp contrast to the company's outlook last October, when it warned that sales growth would be minimal through 2005. Despite the jump in first-quarter sales, Ericsson still forecasts "slight growth" for the full year.

Svanberg said, however, that he saw "encouraging signs of accelerated infrastructure investments in both China and the U.S."

Worldwide, five new WCDMA networks were started in the first quarter of 2005, bringing the total to 61, Ericsson said. The company is a supplier to 36 of these networks. Investors sent the company's stock up 4.33 percent to close at 21.7 kronor on the Stockholm Stock Exchange. The news contributed to modest gains in the FTSE and other European indexes.



Source: International Herald Tribune