Friday, 1 February 2008

Eriksson Reports Low Sales & Decline in Gross Margin for ‘07

World's largest maker of wireless network Ericsson reported flat sales for its fourth quarter and a year-over-year decline in its gross margin for 2007.

“We generated an operating income of SEK 30 b. During the autumn we did however experience significant margin erosion in our networks business,” said Carl-Henric Svanberg, President and CEO of Ericsson

“The continued rapid build out of mobile communications in emerging markets and our significant market share gains have resulted in a higher proportion of new network builds with initial lower margins.

“At the same time, we have seen a decline in network expansions and upgrades in mature markets. All this is resulting in a lower margin. The ongoing shift to new switching technologies, where we now build new footprint, has similar characteristics, which adds to this effect.”

Asia Pacific sales declined by 2% for the quarter and increased by 14% for the full year. China ended strong, and grew 16% for the full year. Pakistan, Bangladesh and Thailand were significantly affected by political unrest. India reported strong sales growth for the full year although growth in the fourth quarter was lower. Australia was down in the quarter as well as for the full year after major rollouts in 2006. The strong subscriber growth continues across the region.

“The mobile networks market growth slowed during the year. As expected, our sales in the quarter were affected by political unrest in certain emerging markets,” added Svanberg.

“Our ambition is to continue to do so, irrespective of market fluctuations. Industry fundamentals and consumer behavior support a positive longer-term outlook.

“The market growth however slowed during last year and for 2008 we find it prudent to plan for a flattish mobile infrastructure market. We will intensify our operational excellence programs and reduce our cost base to safeguard our competitive position."