Ericsson’s profits plunge

Swedish vendor Ericsson saw its operating profit drop by 36% to about 5.6 billion Swedish Crowns ($871 million) in the third quarter of 2007, compared with SEK8.8 billion ($1.4 million) a year ago, the company said in October.

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By  Administrator Published  October 31, 2007

Swedish vendor Ericsson saw its operating profit drop by 36% to about 5.6 billion Swedish Crowns ($871 million) in the third quarter of 2007, compared with SEK8.8 billion ($1.4 million) a year ago, the company said in October.

Ericsson said the results were below its own expectations and it attributed the results to an "unexpected shift in the business mix" and a fall in sales.

"The unexpected development in the quarter is mainly due to a shortfall in sales in mobile network upgrades and expansions which resulted in an unfavourable business mix that also negatively affected group margins," said Carl-Henric Svanberg, president and CEO of Ericsson.

He also noted how margin pressure in the networks business, in markets such as the Middle East and Africa, and lower than expected software sales contributed to the downturn in its fortunes.

Svanberg also pointed out that higher margin network upgrade and expansion contracts, which usually offset their long-term investments in price sensitive markets, did not materialise in the amount they had anticipated.

However, the company reported that sales figures in Central and Eastern Europe, the Middle East and Africa rose 12% year-on-year during 3Q07, making the region the most lucrative global territory for the Swedish company.

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