Gross margin for the quarter also contracted to 33.2 percent from last year’s 36.4 percent, due to lower capacity business in North America and continued 4G coverage deployments in Mainland China, lower IPR revenues and higher share of services sales. Italy contributed 3% towards overall sales.
Ericsson, a leading mobile network equipment maker, beat second-quarter sales and profit forecasts and said its mainstay North American business had stabilised after three quarters of declines, lifting its shares as much as six per cent. He declined to forecast whether US sales would continue to grow this year.
The operating margin in Ericsson’s key networks unit, which accounted for just over half of sales a year ago, hit 8 percent, up from just 2 percent in the first quarter.
Second-quarter sales came in at 60.7 billion crowns ($7.1 billion), topping analysts’ average forecast of 58.6 billion.
Ericsson, which was trading at seven-year highs in April, has plunged since rivals Nokia and Alcatel Lucent moved to merge in a 15.6 billion euro deal to create the world’s second-largest mobile gear maker after Ericsson.
Ericsson reported a strong increase in second-quarter results, helped by currency effects and a pick-up in its main Networks business. After the weak first quarter, profitability at the Networks division recovered recovered, driven by increased sales and a positive currency hedge effect. Its Global Services business was up by 10% sequentially and down 2% on-year at SEK26.4 billion, while Support Solutions saw sales fall by 13% from last year to SEK3.1 billion. Professional services together with software, especially BSS/OSS, is developing really well for us, and the focus we’ve placed on targeted areas such as cloud, TV & media, BSS/OSS and so forth is starting to pay off.
“So far this year it has been about emerging markets, with Middle East, India, China and sub-Saharan Africa continuing to be very strong“, said Frykhammar when asked about other quarterly highlights. Ericsson also reported strong demand in all regions for professional services, and favourable developments in its OSS and BSS business. The target, to achieve savings of approximately SEK 9 b. during 2017 relative to 2014, remains.