Ericsson reports third quarter 2014
Third quarter highlights
- Sales in the quarter were SEK 57.6 (53.0) b., a growth of 9% YoY and 5% QoQ. Sales for comparable units, adjusted for currency, grew by 3% YoY and 2% QoQ
- The sales growth YoY, mainly driven by growth in the India, Middle East, China, and Russia was partly offset by sales decline in North America
- Gross margin increased YoY to 35.2% (32.0%), driven by improved business mix, higher IPR revenues and lower restructuring charges
- Profitability showed stable improvement across all segments
- Operating income amounted to SEK 3.9 (4.2) b. The decline was mainly driven by revaluation of unrealized hedge contracts of SEK -1.0 (0.8) b.
- Cash flow from operating activities was SEK -1.4 (1.5) b.
EPS, diluted, excl. amortizations and write-downs of acquired intangible assets, and restructuring
Comments from Hans Vestberg, President and CEO of Ericsson:
Reported sales increased by 9% year-over-year and sales for comparable units, adjusted for currency, grew by 3% with stable operating income.
The sales growth year-over-year was mainly driven by the Middle East, China, India and Russia, but was partly offset by lower sales in North America.
Mobile broadband sales increased both year-over-year and quarter-over-quarter as we have started to deliver on previously communicated key contracts. We are executing on 4G/LTE contracts in Mainland China and Taiwan and improving sales in Japan.
Furthermore, the investment climate in India continues to improve. Sales in parts of Europe, mainly UK and Germany, showed growth year-over-year while the development in southern Europe continued to be weak.
Sales in North America continued to be driven by operator investments in capacity and quality enhancements. However, business activity slowed down during the quarter as operators currently focus on cash flow optimization.
The momentum for Professional Services continued and generated organic growth in the quarter driven by managed services sales and systems integration. The acquired Red Bee Media was successfully integrated and fully consolidated in the third quarter.
Political unrest prevails in many parts of the world, especially in the Middle East and Northern Africa. The quarter shows that our global footprint, with customer in 180 countries, gives us the scale and strength to manage regional variations.
Profitability showed stable improvement across all segments. This was primarily driven by favorable business mix, higher IPR revenues as well as efficiency enhancements. Operating income was negatively impacted by effects from hedge contracts, higher operating expenses related to modems and the acquired Mediaroom business as well as planned ramp up of investments in IP.
We continue to execute on our strategic agenda; to improve our profitability in the core business in order to invest in targeted areas such as IP networks, Cloud, TV & Media and OSS & BSS. Three important acquisitions were made in the quarter:
- MetraTech accelerates our cloud and enterprise billing capabilities within BSS
- Fabrix Systems extends our overall leadership position in TV & Media
- Majority stake in Apcera that strengthens our position in enterprise cloud
During the quarter we took the strategic decision to stop all further development of modems and shift some R&D resources from segment Modems to Networks to pursue growth opportunities in the radio business.
Through our technology and services leadership we are well positioned to continue to be a strategic partner to our customers as they move to capture new market opportunities.
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