& cplSiteName &

Ericsson Spies Networks Payoff

Ray Le Maistre
1/31/2013
50%
50%

Ericsson AB believes it will start to reap the benefits of its network modernization strategy during 2013 following more than a year of squeezed margins in the division that still delivers the majority of its revenues. In 2011, Ericsson committed to a number of major upgrade projects with customers, knowing that such a strategy would involve labor-intensive, lower-margin business for up to two years. The impact of that decision, coupled with a dip in the value of the network equipment market in general during the past 12 months, can be seen clearly in the company's full-year 2012 financial report issued Thursday: Ericsson's Networks division reported full-year revenues of 117.3 billion Swedish kronor (US$18.5 billion), down 11 percent compared with 2011, while the division's operating margin sank to just 6 percent from 13 percent during the previous year. Those pressures also dragged down Ericsson's full-year gross margin figure to 31.6 percent from 35.1 percent the previous year. Now, though, Ericsson's management team can smell the payback: The hope was always that the low-margin network modernization projects would in turn lead to higher-margin capacity expansion deals that would boost margins noticeably. CFO Jan Frykhammar noted Thursday morning, during a webcast earnings presentation, that "as we go into 2013 we will see the lessening of the impact of those projects … by the second half [of the year] we will see a change to more capacity [deals]." The good news for Ericsson is that while it has taken a hit on its Networks business, its other two divisions have performed better during 2012, with both Global Services (managed and other professional services) and Support Solutions (OSS, BSS and media/video products) recording sales growth of 16 percent and 26 percent respectively. Global Services recorded a slight dip in operating margin to 6 percent while Support Solutions turned an operating profit compared with a loss in 2011. For the full details of the full year and the fourth quarter, take a look at this extensive financial report. The bad news, though, is that while Ericsson's total sales were roughly in line with 2011, up very slightly to SEK227.8 billion ($35.84 billion), its full-year net profit dipped by more than half to SEK5.9 billion because of ongoing losses and impairment costs at comms chip venture ST-Ericsson. (See Euronews: Ericsson Takes $1.2B Hit.) Frykhammar and CEO Hans Vestberg (who was formerly the company's CFO) are convinced that the chip business should be retained (though a new partner is needed -- see Ericsson Seeks New ST-Ericsson Partner). And they're also wary of letting Ericsson's costs and profitability getting trapped in a downward spiral: That's why they are constantly looking for ways to cut costs, even though the company is turning a profit. Ericsson announced a new wave of job cuts in November 2012 as part of its efforts to curb operating expenses. (See Ericsson Sheds 1,550 Staff in Sweden.) The company, though, is constantly gaining staff as it strikes ever more managed services deals that involve the transfer of employees into Ericsson's Global Services division. The company is constantly signing new managed services contracts (15 in the fourth quarter) and ended the year with 110,255 staff, up from 104,525 at the end of 2011. And finally … CEO Vestberg noted during his presentation that mobile packet core business is driving demand for the vendor's Smart Services Router (SSR) products that are built around the Redback assets that cost a fortune (more than $2 billion) in early 2007. Ericsson bagged 19 new router deals during the fourth quarter, bringing the total to 39, so it basically doubled its number of router customer engagements in the final three months of last year. Let's see if that sets a trend for 2013. — Ray Le Maistre, International Managing Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Light Readingís Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
LIVE NOW!
Friday, December 2, 1:00PM EST
The SDN Approach to IP & Optical Integration
Sterling Perrin, Senior Analyst, Heavy Reading
UPCOMING COURSE SCHEDULE
Friday, December 2, 1:00PM EST
The SDN Approach to IP & Optical Integration
Sterling Perrin, Senior Analyst, Heavy Reading
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
Women in Comms Introduction Videos
Korn Ferry Consultant: How to Find, Cultivate & Be the Best Talent

11|30|16   |   4:10   |   (1) comment


Erin Callaghan, a managing consultant for Korn Ferry Futurestep, shares strategies for companies to improve how they recruit and for women to ensure they don't get lost in the pipeline.
LRTV Custom TV
We Can Make the World More Sustainable

11|29|16   |     |   (0) comments


GeSI is a global e-Sustainability Initiative organization bringing together 40 big multinational companies around the world. According to GeSI's report, information and communication technology can make the world more sustainable. Luis Neves, chairman of GeSI, shared with us his opinion at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
Finding a New Way to Engage Customers & Drive Revenue

11|29|16   |     |   (0) comments


Mobile revenues are declining. Digicel, a player in the Caribbean telecommunications/entertainment space, has found a new way to engage customers and drive revenue. John Quinn, CTO of Digicel, shared with us its story at Ultra-broadband Forum (UBBF2016)
LRTV Custom TV
Do You Really Need Gigabit Infrastructure?

11|29|16   |     |   (0) comments


Altibox is the biggest fiber-to-the-home (FTTH) player and the largest provider of video and TV in Norway. They started out with zero customers in 2002. Now they have close to half a million households and companies attached to their FTTH business. Nils Arne, CEO of Altibox shared with us their story and insight on 5G at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
BTís Openreach Strategy & Its Updates in 2016

11|29|16   |     |   (0) comments


A lot of developments at Openreach this year in terms of strategy and planned investments. Peter Bell, CIO of Openreach BT, shared with us the updates of Openreach at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
ITU: The Broadband Is Our Future

11|29|16   |     |   (0) comments


At Ultra-broadband Forum, Houlin Zhao, Secretary General of ITU, discussed how important it is for countries, companies and everybody to be working together to help to build the broadband and digital economies (UBBF2016).
LRTV Custom TV
Tackling 5G in Dallas

11|28|16   |     |   (0) comments


Here are our highlights of the 5G North America show in Dallas, Texas with Light Reading's Dan Jones.
LRTV Interviews
Cox Prepping for Virtualization Trials

11|14|16   |     |   (0) comments


In this video interview, Cox's Jeff Finkelstein discusses MSO's plans to test managed business services in early 2017 and tackle Distributed Access Architectures.
LRTV Custom TV
Drivers & Potential of NGP

11|11|16   |     |   (0) comments


ETSI has created an Industry Specification Group to work on Next Generation Protocols (NGP ISG), looking at evolving communications and networking protocols to provide the scale, security, mobility and ease of deployment required for the connected society of the 21st century. The NGP ISG will identify the requirements for next generation protocols and network ...
LRTV Custom TV
Huawei IP 2020 for Future Networks

11|11|16   |     |   (0) comments


Future Networks should satisfy many requirements such as high throughput, extremely low latency, flexible mobility, intrinsic security, networking automation, and so forth. The Chief Architect of Huawei Future Networks addresses a holistic solution, i.e., IP 2020, to achieve these requirements for various future life scenarios (e.g., autonomous driving, tactile ...
LRTV Custom TV
Digital Object Architecture

11|11|16   |     |   (0) comments


Digital Object Architecture provides a basic information infrastructure that can facilitate interoperability between or among different systems, processes, and other information resources, including different identity management systems. Digital objects are networked objects that are named by digital object identifiers and instantiated by an infrastructure service ...
LRTV Custom TV
BT's Openreach Has High Hopes for Long-Reach VDSL

11|11|16   |   06:04   |   (0) comments


Peter Bell, Network Portfolio CIO at BT's access business Openreach, talks about the operator's trial of a new broadband access technology called Long Reach VDSL.
Upcoming Live Events
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
AT&T Debuts DirecTV Now on New Video Platform
Mari Silbey, Senior Editor, Cable/Video, 11/28/2016
Apple Seeds 5G? Seeks 'Multi-Gigabit' Chip Designer
Dan Jones, Mobile Editor, 11/30/2016
Altice Plans FTTH for Entire US Footprint
Iain Morris, News Editor, 11/30/2016
Altice FTTH Bill Could Hit Almost $9.6B in US
Iain Morris, News Editor, 12/1/2016
Samsung Bows to Investors, Considers Revamp
Iain Morris, News Editor, 11/29/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Live Digital Audio

Even when there's a strong pipeline of female talent in the comms industry, it tends to leak all the way to the top. McKinsey & Company says women experience pipeline leakage at three primary points: being unable to enter, being stuck in the middle or being locked out of the top. Each pipeline pain point presents its own challenges, but also opportunities to stop the leak. Wireless operator Sprint is making a conscious effort to improve its own pipeline from new recruits to the C-suite, and it wants the rest of the industry to do the same. In this Women in Comms radio show, WiC Board Member and Sprint Vice President of Enterprise Sales Nelly Pitocco will give us her take on the industry's pipeline challenges. Pitocco, who joined Sprint in May and has spent 20 years in the comms industry, will also offer solutions, share how Sprint is tackling the challenge within its own organization and take your questions live on air.