Ericsson shares rally on first-quarter figures

Ericsson remains the only profitable mobile infrastructure company

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By  Derek Francis Published  April 28, 2008

Ericsson last Friday reported a first-quarter net profit of SKr 2.6 billion ($434 million), a 55% fall from the same period last year, but significantly better than expected.

Its operating profit in the three months to 31st March, 2008 also saw operating margins contract from 19.3% last year to 9.7%. Despite this, the vendor's share price enjoyed its biggest gain in five years, rising 17% to SKr 14.5 ($2.43) on Friday's trading - as analysts took note of the company's rising sales in the US and emerging markets. However, Ericsson warned that market conditions will remain difficult this year.

"Our business developed well in the quarter, considering the present market environment and the declining US dollar," Carl-Henric Svanberg, president and CEO, Ericsson, said in a statement.

"We still find it prudent to plan for a flattish mobile infrastructure market in 2008. The ongoing cost reductions as we adjust to such a scenario are running according to plan.

"The sales development in the quarter reflects the demand for mobile infrastructure, especially in high-growth markets. Sales are picking up in the US while Western Europe remains slow. The proportion of new network builds in high-growth markets, especially in India, is increasing. In combination with a weaker U.S. dollar, this continues to put pressure on our margins," he added.

Ericsson is currently the only profitable mobile infrastructure vendor, with rivals such as Nokia Siemens Networks having reported an operating loss of EUR74 million ($115 million) last week. Alcatel-Lucent is also expected to unveil a loss of about EUR170 million ($266 million).

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