Swedish wireless equipment maker LM Ericsson has reported nearly 64 percent decline in second quarter net profits with sales of network infrastructure going down in China and Russia.
The company reported Wednesday a worse-than expected net profit of 1.1 billion kronor ($156 million) for the three month period, down from the 3.1 billion kronor in the same period a year ago.
Global Services and Support Solutions showed strong performance YoY and QoQ. The underlying business mix, with higher share of coverage projects than capacity projects, was unchanged in the quarter and is expected to prevail short term. The negative gross margin impact from the network modernization projects in Europe will start to gradually decline end 2012.
Cash flow from operations SEK 1.4 b. impacted by high working capital mainly due to late invoicing.
Net income SEK 1.2 b., down from SEK 3.2 b. YoY, impacted by lower profitability in Network and increased loss in ST-Ericsson.
"In the quarter, demand for Global Services and Support Solutions was strong, while Networks sales decreased YoY mainly due to the expected decline in CDMA equipment sales as well as lower business activity in China, including weaker sales of GSM and lower 3G sales in Russia," says Hans Vestberg,
"In Global Services all areas showed good growth in the quarter due to operators' focus on operational efficiency and high project activities. The strong development for Support Solutions was driven by billing systems and TV solutions. Global Services and Support Solutions together represented about half of the Group's revenues. The growing Global Services business has a dilutive impact on gross margin” he added.