Ericsson’s share price grew by around 5% on Friday morning as the company presented a set of second-quarter financials that showed signs of stabilisation in North America and the continued impact of 4G network rollouts in China.
The Swedish vendor posted sales of 60.67 billion kronor (€6.5 billion) for the three months to the end of June, up by 11% on-year but down by 6% at constant currency levels.
Its net profit attributable to the parent company came in at SEK2.09 billion, down from 2.58 billion a year earlier. Its operating income fell by 11% to SEK3.56 billion, but excluding restructuring charges it grew by 49% to SEK6.3 billion.
"The mobile broadband business in North America stabilised in the quarter, but remained at a lower level than a year ago," said Ericsson’s CEO Hans Vestberg in his notes accompanying the results announcement.
North America is Ericsson’s large st regional segment, generating 24% of sales. It brought in SEK14.6 billion in Q2, down by 4% on the year-ago quarter but an increase of 19% sequentially.
"The YoY decline in North America was partly offset by an increased pace of 4G deployments in Mainland China," Vestberg said. "Sales growth was strong in the Middle East, India and South East Asia, while it continued to be weak in Japan," he added.
China and Japan both fall under Ericsson’s North East Asia business unit, which reported 8% sales growth to SEK6.9 billion.
Ericsson’s Networks segment reported revenue of SEK31.2 billion, an increase of 16% in the previous quarter, at constant currency levels, but down 9% year-on-year. 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.
As a result, one industry analyst sounded a note of caution on Friday.
"The results indicate that the long period of high investment by operators in America and Europe in mobile broadband and LTE macro-infrastructure is coming to an end," said Northstream CEO Bengt Nordström.
"Operators in these regions now want lower-value investments for improving their networks’ capacity and performance," he said.
Nordström also pointed out that Ericsson might not be able to rely on China to boost its numbers for much longer.
"It’s likely that China has two to three quarters left of intensive LTE macro rollout, after which it too will follow America and Europe and become a market centred on lower-value hardware, software and services for existing networks," he predicted.
