Ericsson beats expectations for earnings in Q1

PanARMENIAN.Net - World number one mobile network gear maker Ericsson beat expectations for earnings and margins in the first quarter raising hopes that recent market weakness has bottomed out, Reuters reported.

The telecoms equipment market recovered strongly in 2011 as operators invested to catch up with a surge in traffic from smartphones and tablets, but the final quarter saw renewed concern about global growth and, for Ericsson, a shift in business that cut deeply into margins.

With global economic growth likely to be modest this year and with the company saying that low margin projects would continue to dominate, analysts had fretted Ericsson was facing an extended downturn.

Ericsson's underlying earnings before interest and tax reached 2.8 billion crowns ($416 million) excluding loss-making joint ventures but including restructuring charges.

That was down 56 percent on the year before but topped a mean forecast of 2.5 billion in a Reuters poll.

The group's gross margin rose to 33.3 percent in the quarter from 30.2 percent in the final three months of 2011, a trend the company pinned on seasonal effects, a greater share of higher-margin capacity expansion projects and a smaller share of lower-margin services business.

While there were positive signs on the gross margin, sales in the key networks unit were down 18 percent. Total sales were 51.0 billion crowns, versus a forecast of 52.9 billion.

Ericsson said operators remained cautious due to the macroeconomic environment.

Ericsson's caution chimed with that of rivals Huawei and Nokia Siemens Networks which have warned the soft global economic outlook could prompt telecom carriers to cut investments.