Ericsson Reports Flat Q2 Sales

Sales were flat YoY at SEK 55.3 b. For comparable units and adjusted for FX, sales increased 7% YoY and 6% QoQ.

Operating income incl. JV was SEK 2.5 (2.1) b. with an operating margin of 4.5% (3.8%).

The quarter was negatively impacted by one-time items of SEK -0.9 b. from losses due to divestments and exiting the telecom and power cable operations.

Net income was SEK 1.5 (1.2) b.

EPS diluted was SEK 0.45 (0.34). EPS Non-IFRS was SEK 0.88 (0.78).

Cash flow from operating activities was SEK 4.3 b.

COMMENTS FROM HANS VESTBERG, PRESIDENT AND CEO
"Sales for comparable units, adjusted for FX, grew 7%. Reported sales were flat YoY, due to continued currency headwind," said Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC)."There was continued high project activity in Europe as well as in North America where two large mobile broadband coverage projects have peaked in first half 2013. North East Asia had another challenging quarter following continued structural decline in GSM investments in China, FX in Japan and lower business activity in South Korea due to spectrum delays.

The business mix, with a higher share of coverage projects than capacity projects, started to shift slightly towards more capacity during the quarter.

We implemented our strategy to capture new market share in the network modernization projects in Europe starting in 2010, despite their initial lower margins. Now that these projects gradually come to an end, we can conclude that we have been successful in gaining market share and regained leadership in Europe. It is also encouraging to see that we are now starting to engage in new business, based on this footprint, regarding capacity and LTE projects in Europe.

We continue to strengthen our leading position in 4G/LTE. The vendor selection processes for 4G/LTE in Russia and China continue and to date we have been awarded contracts by two large operators in Russia.

During the quarter we also reached one billion subscribers in networks managed by Ericsson. This clearly shows the confidence our customers have in our ability to create value for them.Profitability improved YoY, adjusted for one-time effects related to exiting the telecom and power cable operations and the divestment of Applied Communication Sciences (ACS). The improvement was driven by higher gross margins and lower operating expenses. This was partly offset by currency headwind.

With the announcement in April and July of the intended acquisitions of Microsoft's Mediaroom and Red Bee Media, we continue to strengthen our position in TV and media. As TV and media converge with telecom we can leverage our strength in media management and managed services. Video is already the single largest contributor to traffic in mobile networks and is expected to grow by 60% annually until 2018.

While the macroeconomic situation in Europe remains challenging and the political uncertainty in parts of Region Middle East, such as Egypt, increases, the long-term fundamentals in the industry remain attractive and we are well positioned to continue to support our customers in a transforming ICT market," concludes Vestberg.

Ericsson AB