Ericsson up on healthy quarter

How the current economic climate impacts the wireless industry remains to be seen, but the world’s infrastructure leader posted a strong third quarter despite the economic downturn.
L.M. Ericsson released its results from the latest quarter today and reported operating income of $763 million. The showing surprised investors as the company reported sales of $6.5 billion. The showing also marked a significant rebound from a year ago when the Swedish giant reported losses, which resulted in company stock to decline.
“During the quarter, sales grew by 13% with strong development in all regions except Western Europe,” Carl-Henric Svanberg, company president and CEO, said in a statement. “Our financial position is strong with healthy net cash and high payment readiness.”
On Monday morning the company’s stock was trading on the NASDAQ at $8.10 per share, a 16% increase. Maynard Um, an analyst with UBS Equity Research, said in a note to investors that the company’s results “were well ahead of expectations.”
Um said the company’s strong showing was due to increased sales in the United States, India and Latin America.
The company reported that sales in networks were up 16% year-over-year and 5% year-to-date. Network services were in line with equipment sales. Strong growth for the company occurred in India, Indonesia, Russia and Brazil.
Sales in Western Europe declined by 6% from a year ago and are down 5% for the year. However, sales were up 43% in Latin America, 44% in North America and 17% in Asia Pacific when compared to the company’s 2007 third-quarter results.
The company said its increase in sales in the United States is the result of the continued buildout and expansion of mobile broadband. Smartphones and broadband-connected laptops are generating demand for fast and efficient networks.
The company is gearing up for a flat market for the final quarter of the year. Svanberg said in the current financial turmoil, it is hard to predict how operators will react and how consumer spending on telecommunications will be affected. He said Ericsson’s customers are generally financially strong, networks are loaded and traffic shows strong increase.
The company concludes that the fundamentals for longer-term positive development remain solid for the industry.
Um, of UBS, said investors should be concerned for 2009 despite a healthy outlook for Ericsson in the fourth quarter. He said the company could encounter a slowdown in spending in 2009 by such clients as AT&T Mobility and China Mobile Ltd. because of the current economic environment.
As of the first quarter of the year, Ericsson owned 29% of the world’s infrastructure market, followed by Nokia Siemens Networks, 23%, and Alcatel-Lucent, 13%, according to ABI Research. In the United States, Ericsson is fourth at 10%, trailing Motorola, 46%, Alcatel-Lucent, 21%, and Nortel, 13%.