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Earnings shock from Ericsson

Thursday, 18 July 2013

Despite the strong gross margin, telecom company Ericsson fails to reach up to expectations in terms of earning.

Ericsson's key gross margin increased slightly in the second quarter to 32.4 percent, up from 32 percent in both the same period last year and the first quarter. But the performance of the core business, Networks was not even half as big as analysts collective had anticipated. The operating profit stayed at Skr1.3 billion against 2.7 expected by the analysts community.

Consolidated earnings burdened also by non-recurring costs. Overall, net profit of Skr1.5 billion is only half as large as the collective analysts had expected.

Neither sales reached up to advance tips. Sales were unchanged, Skr55.3 billion. According the analysts, low average forecast of Skr56.4 billion was expected.

Organic growth, excluding currency effects, was 7 percent. Profit dragged down by one-time items totalling Skr900 million, related to losses on sales and withdrawal from the business for the telecom and power cables. According to analysts it was anticipated a recurring items on average of Skr680 million.

Service Operations Global Services operating profit exceeded expectations while the third and smallest business area Support Solutions made the loss instead of an expected profit.

On the positive side, however, the second quarter saw Ericsson's key network unit post 8 percent sales growth adjusted for currencies, extending a slow recovery that started at the end of 2012, but still below expectations.

After a tough 2012, when Ericsson's networks unit saw sales drop 12 percent, operators have started to gradually increase investment in high-speed mobile broadband  networks in some
by Scancomark.com Team



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