Ericsson on Friday reported lower third quarter sales, driven partly by slowing 4G deployments in China.
The Swedish kit maker generated revenue of 59.2 billion kronor (€6.3 billion) in the three months to 30 September, down 9% on a comparable basis, due to lower sales of network equipment.
Indeed, Ericsson’s Networks division saw like-for-like sales drop 15% year-on-year to SEK28.8 billion. In its financial report, Ericsson said it saw lower network activity in Japan, Russia, and Brazil, as well as "a slowdown of…4G deployments" in Mainland China.
Indeed, in Ericsson’s North East Asia segment, which includes Japan and China, group sales slipped 10% year-on-year to SEK6.3 billion. Revenue in Northern Europe and Central Asia fell 20% to SEK1.4 billion, driven lower investment levels in Russia. Meanwhile revenue in Latin America declined 5% to SEK2.5 billion due to a slower pace of mobile broadband investment – as well as adverse currency effects – in Brazil.
The one significant bright spot was India, where revenue soared 81% year-on-year SEK2.4 billion.
"The high level of mobile broadband investments, which started in the beginning of 2015, continued in the quarter with the main driver being mobile data traffic growth. The managed services business developed favorably as operators focus on network optimization and efficiency," Ericsson said.
The slump at Ericsson’s Networks unit was partly offset by its Professional Services unit, which generated revenue of SEK20.5 billion, compared to 17.8 billion in Q3 2014. Although the higher share of services in the revenue mix resulted in Ericsson’s gross margin, excluding restructuring charges, narrow to 34.5% from 35.5% a year earlier.
However, Ericsson’s third quarter operating income increased to SEK5.1 billion from SEK3.9 billion a year earlier, driven partly by lower operating expenses stemming from its cost-cutting programme. The company aims to save SEK9 billion per year by 2017 relative to 2014.
"Our strategic growth initiatives build on a combination of excelling in our core business and establishing leadership in targeted growth areas," said Ericsson CEO Hans Vestberg, in a statement.
"There is an increased customer interest in future network architecture for 5G, virtualisation, efficient video delivery and internet of things (IoT)," he continued. "With our ongoing strategic initiatives, we are well positioned to create value for our customers and shareholders in a transforming market."
PLEASE NOTE: A story about Ericsson’s third quarter 2014 financial results erroneously appeared on last week’s front page. This is the correct story (Monday 26 October 2015).
