Ericsson stock climbs on Q1 financials showing mobile broadband gains

L.M. Ericsson (ERIC) stock climbed more than 11% this morning on the company’s first-quarter financials, during which the world’s largest network vendor maintained an impressive 38% gross margin and a 17% year-over-year increase in sales, driven by growth in mobile broadband.
Global network rollouts appear to be helping many infrastructure vendors. Rival Nokia Siemens Networks also beat market forecasts for the first quarter, and competitor ZTE Corp. said its profits increased 16% in the quarter. Alcatel-Lucent reports May 6.
The Swedish company posted income of $673 million for the first quarter, up an astounding 220% from the year-ago period, mainly due to increased profitability in its Networks business. Ericsson President and CEO Hans Vestberg specifically called out the company’s multi-standard radio base station RBS 6000 in talking about the success of the Networks unit. Sales topped $8.7 billion in the quarter.
“The strong demand for mobile broadband resulted in five out of 10 regions showing growth year-over-year,” the company said in a prepared statement. “Countries with especially strong growth were the U.S., India, Japan, Korea and Russia. China had continued good momentum for 2G.”
“We believe the industry fundamentals continue to be strong,” said Ericsson SFO Jan Frykhammar in an interview with RCR Wireless News. The company is predicting 10% year-over-year growth between 2011 and 2013.
A strong Swedish Krona impacted all of Ericsson’s sales. The SEK has appreciated 60% against the dollar, Frykhammar noted. Networks segments, however, was still up 35% from a year ago. The impact was seen more in the Services business, where its managed services business was up 1% year over year and sales in its professional services business was down 4% during the same timeframe. Frykhammar said the company completed nine new managed service contracts in the quarter – four are new projects and five are extensions or expansions. The company counts 800 million plus subscribers in its managed services business.
Ericsson said GSM technology grew year over year, driven by capacity needs in China and India. In China, GSM/Edge technology is a fallback for mobile broadband service.
By region, North America remains Ericsson’s strongest geography, with sales up 39% year over year, to nearly $2.2 billion, followed by greater China and Northeast Asia, which accounted for sales of $1.4 billion, up 74% from the year-ago period.
While Ericsson was not immediately impacted from the earthquake and subsequent tsunami that devastated Japan earlier this year, the company does expect to see component delays and has taken measures to minimize that impact, as well as support its Japanese suppliers, Frykhammar noted.
Ericsson said its mobile infrastructure market share increased in CDMA, W-CDMA/HSPA and LTE technologies.
“Global mobile penetration is 79% and total mobile subscriptions have reached 5.5 billion,” Ericsson said. “India and China accounted for about 48% of the estimated 190 million net additions during the first quarter, adding around 65 (million) and 30 million respectively. Indonesia and Vietnam were third and fourth countries in terms of net additions. India has now passed 800 million subscriptions and the U.S. has passed 300 million subscriptions.”