Faster growth signals a turnaround for Ericsson
ERICSSON, the world's biggest maker of mobile telephone network equipment, said sales and profit grew faster than expected in the fourth quarter as phone operators in the US and Canada spent heavily to upgrade wireless networks.
The company booked a net loss in the quarter as it wrote down the value of ST-Ericsson, an unprofitable smartphone component venture with the French chip maker STMicroelectronics.
But investors apparently looked past that to focus on the underlying growth. Shares of Ericsson, based in Stockholm, rose almost 10 per cent after the earnings report, which showed that demand from North America had helped lift Ericsson's global sales of network equipment, the company's main business, by 6 per cent from a year earlier.
Ericsson's sales of equipment, software and services in the three months to December 31 rose 5 per cent to 66.9 billion Swedish krona ($10.2 billion).
"This suggests the declining sales of network equipment we have seen for some time has finally begun to turn around," an analyst at Swedbank in Stockholm Hakan Wranne, said.
In North America, Ericsson said sales of mobile broadband and other network gear surged 86 per cent, to 9.4 billion krona, in the quarter. Sales of equipment rose 10 per cent in western Europe and 38 per cent in India. The increase followed four quarters of declining global network sales.
"We continue to believe the long-term fundamentals of this industry are attractive," chief executive of Ericsson Hans Vestberg, said. "It is clear that society will be using mobile broadband and the cloud much more than they are now."
Ericsson said it took a charge of 8.6 billion krona against earnings for ST-Ericsson, which is based in Geneva and has generated about $2.7 billion in losses since February 2009. ST-Ericsson employs 5090 workers and makes processor modules and modems for some Samsung, Motorola and Sony smartphones.
Mr Vestberg did not comment on the future of ST-Ericsson. Last month, STMicroelectronics announced plans to leave the venture and Ericsson, which has written off the entire value of its investment, said it had no intention to buy its partner's stake.
The New York Times