Ericsson misses first quarter forecasts, sees boost in second half

Wednesday 23 April 2014 08.56
Ericsson missed Q1 sales and profit forecasts due to continued weak demand in North America and Japan
Ericsson missed Q1 sales and profit forecasts due to continued weak demand in North America and Japan

Mobile telecom equipment maker Ericsson expects recent business wins to lift sales later this year.

This comes after it missed first-quarter sales and profit forecasts due to continued weak demand in North America and Japan.

Analysts have been expecting Ericsson sales to get a boost this year as big carriers in Europe and China spend on high-speed 4G LTE networks to cope with a surge in mobile data traffic, driven by more video use on smartphones. 

Growth in China, the Middle East and Latin America in the first quarter only partly offset a fall in sales due to large projects coming to an end in North America and Japan.

"With current visibility, key contracts awarded will gradually impact sales and business mix, mainly in the second half of the year," Ericsson said in a statement today.

Sales at Ericsson's key Networks unit fell by 10% adjusted for currency swings.

But on a brighter note, underlying profitability continued to improve. The closely watched gross profit margin rose to 36.5% for the group. 

That compared with expectations of 34% and 32% the same time last year, boosted by mobile broadband capacity projects and more software sales to some clients. 

Earnings before interest and tax were 2.6 billion Swedish crowns ($395 million) compared with 2.1 billion in the year-ago quarter, missing a mean forecast of 3.5 billion in a Reuters poll of analysts. 

Sales for the group, the world number one mobile network equipment maker, were 47.5 billion crowns compared to forecasts of 51.8 billion.