Ericsson 4Q profits up, but vendor cautious on 2005

10 Feb 2005

Ericsson of Sweden reported a 60% rise in pre-tax profits to SKK9.3 billion (USD1.3 billion) in the three months to 31 December 2004, on a 9% rise in sales to SKK39,4 billion, and net profits of SKK6 billion, up from SKK100 million, but nonetheless delivered a cautious outlook for sector growth in 2005. Despite its healthy order book and its fifth straight quarterly profit, the manufacturer said it had benefited from ‘pent-up demand’ from mobile operators in 2004, and reiterated its earlier forecast that the GSM market will deliver only ‘slight growth’ compared to 2004. The group’s fourth quarter results were also helped by cost cutting measures, though a gross margin of 45.6%, compared to analysts’ estimates of 47.2%, was disappointingly lower than expected.

On a more positive note, Ericsson said that turnover from mobile networks operations around the world were generally up, except in North America where a round of market consolidation had impacted on sales. Customers such as T-Mobile USA and Hebei Mobile Communications upgraded their networks in response to higher traffic demand following three years of reduced spending. The company’s CEO Carl-Henric Svanberg added that 2004 was a turning point for W-CDMA network rollouts in Europe and across Asia, and the total number of 3G subscribers has now reached 16 million, with further gains set to come by way of several key contracts in the US, Europe and Africa in 2005. Moreover, growth in the 2G market from upgrades such as EDGE and GPRS is expected to continue in 2005, with a particular focus in emerging markets.