telecompaper [ ] 2010-07-23

Ericsson Q2 sales hurt by component shortages

Ericsson reported second-quarter sales of SEK 48.0 billion, down 8 percent from a year earlier. Sales of network equipment were down 12 percent to SEK 25.5 billion, while services revenues were flat at SEK 20.1 billion. The company said the continued industry component shortages and supply chain bottlenecks took an estimated SEK 3-4 billion off quarterly sales. The market conditions were similar to the second half of 2009, with mixed operator investment behavior, Ericsson said. All regions, except North America, showed lower year-over-year sales in Q2, although sequential sales showed a more mixed picture, with growth in regions such as the Mediterranean, North America, Northern Europe and Central Asia, as well as Sub-Saharan Africa. Ericsson managed to improve its gross margin to 39 percent from 36 a year ago, while operating profit, excluding joint ventures, was down 12 percent to SEK 5.3 billion. The company said the integration of the acquired Nortel businesses, higher investments in certain R&D areas and a growing number of LTE trials resulted in an increase in operating expenses in the quarter. Ericsson said its cost-reduction programme was completed in Q2, which should lead to SEK 15-16 billion in annual savings from the second half. Net profit improved to SEK 2.0 billion from SEK 0.8 billion a year ago, thanks to improved profitability at Sony Ericsson.