Ericsson CFO “not concerned” by Q1 revenue decline as profits rise

Ericsson reported a jump in net profit during the first three months of 2014, but the CFO said he remains unconcerned at falling revenues.

Profits at the Sweden-based company were up 41 percent year-on-year to €187 million, with gross margin rising from 32 percent in Q1 2013 to 36.5 percent this year.

The jump was thanks to customers continuing to focus on higher margin capacity investments.

However, a majority of such contracts hit revenues, which were down nine percent to €5.2 billion.
The vendor cited continued negative impact from North America and Japan, but said sales were up 22 percent in the Middle East, driven by mobile broadband infrastructure deployments in Iraq, Pakistan and Saudi Arabia.

Ericsson’s two principal business units both registered a decline in sales; the networks and global services arms saw a fall of 13 percent and five percent respectively.

There was better news in the company’s support solutions division, which registered a 13 percent rise in sales, thanks in part to increased sales in OSS.

In February, for example, US broadband provider CenturyLink signed up to deploy Ericsson’s OSS/BSS platform.

The Sweden-based company has also continued to invest in the broadcast arena with the acquisition of Azuki Systems.

Chief Financial Officer Jan Frykhammar told European Communications that he was not concerned about the overall decline in revenues.

“The market knows it’s because of the end of two major mobile broadband coverage projects in North America,” he said.

“We have a different business mix to 2013 and some good new contracts, the results of which we’ll see in the second half of the year.”

Since 1999, Ericsson has transformed its sales from 73 percent hardware and 27 percent software and services, to the current level of 34 percent hardware, 43 percent services and 23 percent software.

With a continued focus on IP, OSS/BSS and TV services, the ratios will continue to move towards software and services, according to Frykhammar.

“Currently, 15 percent of the global population has access to 4G LTE services. In five years time it will be more like 50 percent, so hardware will still be in the mix but expansion will come from software.”

The CFO added that the company continued to be “proactive” on controlling internal costs.

Culled from eurocomms