Light Reading

Ericsson Leaps on Q2 Margin Boost

Ray Le Maistre
7/18/2014
50%
50%

Swedish giant Ericsson reported solid second-quarter financials Friday morning, the highlight of which was the consistent margin improvement driven by capacity (rather than coverage) investments by its operator customers.

Ericsson AB (Nasdaq: ERIC) spent much of 2012 and 2013 talking about how it was helping operators roll out new networks, a long-term and lower-margin exercise, but the company always said that would be followed by higher-margin capacity investments. And that's how it has turned out: The unknown, of course, is the duration and scale of those capacity investments, and not even Ericsson can predict that. (See Ericsson Flatlines in 2013, Trails Huawei and Ericsson Looks to Future as Q1 Sales Slump.)

Second-quarter revenues dipped slightly year-on-year to 54.8 billion Swedish kronor (US$8 billion), but gross and operating margins, as well as net income, all improved, as the table below shows.

Table 1: Ericsson Q2 2014 Key Financials

In SEK billions Q2 2014 Q2 2013 Change Q1 2014 Change
Revenues 54.8 55.3 -1% 47.5 15%
-- Of which Networks 29.0 28.1 3% 24.4 19%
-- Of which Global Services 23.1 24.9 -7% 20.4 13%
-- Of which Support Solutions 2.8 2.3 21% 2.8 2%
Gross margin 36.4% 32.4% Increase of 4 percentage points 36.5% Decrease of 0.1 percentage points
Operating margin 7.3% 4.5% Increase of 2.8 percentage points 5.5% Increase of 1.8 percentage points
Net income 2.7 1.5 76% 1.7 57%
Source: Ericsson

Investors liked what they saw, as Ericsson's share price jumped by 8% to SEK 85.85 in morning trading on the Stockholm exchange.

CEO Hans Vestberg, who earlier this year tipped Brazil to win the FIFA World Cup (close call!), noted that the company has continued to win new managed services deals -- 21 in the second quarter -- and is executing on 4G rollouts in China and Taiwan. (See APAC Fuels 4G Action.)

He also cited the vendor's BSS deal at T-Mobile US Inc. as "one of the largest transformation deals we have ever done," and pointed to ongoing growth for the company's IP router platform business, which now has 120 customers and its own operating division. (See T-Mobile Swaps Out Amdocs BSS for Ericsson , Ericsson Creates Cloud & IP Unit, and Ericsson CEO's New Business Logic.)

Both Vestberg and CFO Jan Frykhammar cited the vendor's OSS/BSS and TV/media assets (part of the Support Solutions unit) as critical parts of the business for the future, and promised that further R&D investments will be pumped into these areas, along with the ongoing virtualization of the vendor's product portfolio. (See Ericsson Launches Cloud OSS, Ericsson Balances 'Open' Future, Legacy Past, Ericsson Shares its Media Vision 2020, Ericsson Bags Azuki Systems, and Euronews: Ericsson Buys Media Services Firm.)

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
7/18/2014 | 7:36:16 AM
Looking long term
The management team is keeping its faith in OSS, BSS< video, IP, cloud/virtualization, and Global Services as drivers for the future -- it's hard to pick holes in that approach.

Of course, that doesn't mean Ericsson will execute, but it's vision seems solid.
Flash Poll
From The Founder
Anshul Sadana answers questions from Steve Saunders, Light Reading's founder and CEO, about Arista's CloudVision, a global cloud network controller for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
Video Exclusive With Basil Alwan, Alcatel-Lucent

7|24|15   |   26:44   |   (4) comments


Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
LRTV Custom TV
VDF: Enable the Financial With Mobile Money

7|20|15   |   06:53   |   (0) comments


Ian Ravenscroft discusses how operators can expand to occupy the entire digital services value chain through service innovation.
LRTV Custom TV
Telefónica on OSS Transformation

7|20|15   |   06:01   |   (0) comments


Jose Gonzales discusses the details of Telefónica's operation transformation program.
LRTV Custom TV
Judi Achmadi on Huawei's Cloud Storage Solution

7|20|15   |   03:33   |   (0) comments


Judi discusses the key business goals of TelekomSigma's public cloud service and how Huawei's solution helps them address challenges.
LRTV Custom TV
KPN Enlightening Digital Business & IT Transformation

7|20|15   |   06:19   |   (0) comments


Rob de Beer discusses the changes that operators need to make with service innovation now coming from the Internet world.
LRTV Custom TV
Stratus Telco-Grade Cloud Solutions & NFV

7|20|15   |   07:34   |   (0) comments


Ali Kafel from Stratus Technologies addresses high-availability concerns within the telco industry with a solution that enables telcos to provide high-availability and stateful fault-tolerance using a software-based approach.
LRTV Documentaries
The Six Million Dollar Business Man

7|20|15   |   01:52   |   (0) comments


Steve Saunders, publisher. A man barely alive after an acquisition malfunction imploded the company he founded. Gentlemen, we can rebuild Light Reading. Better, faster, stronger.
Between the CEOs
CEO Chat With Anukool Lakhina, Guavus

7|20|15   |   38:51   |   (1) comment


Guavus CEO Anukool Lakhina talks to Light Reading founder and CEO Steve Saunders about the role of operational analytics in the communications services and networking sectors, particularly in relation to IoT.
LRTV Custom TV
IBM's Flash Storage With Intel QuickAssist

7|20|15   |   03:18   |   (0) comments


Intel's Bev Crair and IBM's Eric Herzog discuss how IBM's V9000 Flash Storage System has helped customers around the world. Featuring real-time compression powered by Intel QuickAssist Technology, the V9000 is a next-gen flash storage solution.
LRTV Huawei Video Resource Center
Thailand's AIS: Transforming to an FMC Operator

7|17|15   |   4:53   |   (0) comments


Saran Phaloprakarn, Senior VP of Fixed Broadband Business Management of Thailand's AIS, was a keynote speaker at the first Asia-Pacific Ultra Broadband Summit in Bangkok. In this video, he talks to Heavy Reading about transforming into an FMC (FBB+MBB+Content) operator.
LRTV Huawei Video Resource Center
Cambodia's TRC Discusses Its Plans for National Broadband

7|17|15   |   10:33   |   (0) comments


In this video, Chakyra Moa, Chairman of Telecommunication Regulator of Cambodia (TRC), talks in in-depth with Heavy Reading about the Cambodia's current telecom market and TRC's goals and expectations for the future.
LRTV Documentaries
5G Phone

7|16|15   |   2:09   |   (4) comments


A man has an opportunity to purchase the world's first working 5G phone. Imagine the possibilities...
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
December 1, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
Network operators start seeing savings from NFV in the first year, according to a study by Affirmed Networks and ACG.
Hot Topics
T-Mobile Launches RCS Messaging
Sarah Thomas, Editorial Operations Director, 7/22/2015
Huawei Working Hard for Rural Success
Carol Wilson, Editor-at-large, 7/22/2015
AT&T U-verse TV Hits the Skids
Alan Breznick, Cable/Video Practice Leader, 7/24/2015
Eurobites: Alcatel-Lucent, Vodafone Test TWDM-PON
Paul Rainford, Assistant Editor, Europe, 7/22/2015
Robbins Succeeds Chambers as Cisco Changes CEOs
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/27/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
Guavus CEO Anukool Lakhina talks to Light Reading founder and CEO Steve Saunders about the role of operational analytics in the communications services and networking sectors, particularly in relation to IoT.
Cats with Phones
Distract-a-Cat Click Here
The vibrate function makes for a useful cat distraction.