Ericsson 3Q Net Profit Up 17%, Revenue Slightly Weak"
STOCKHOLM -(Dow Jones)- Ericsson has posted strong growth in net profit during the third quarter as contributions from 50%-owned mobile phone maker Sony Ericsson boosted results. It said it sees moderate growth in its main mobile infrastructure markets for 2007.
Ericsson said net profit in the quarter rose 17% to SEK6.23 billion from SEK5.31 billion a year ago. Revenues meanwhile rose 12% to SEK40.8 billion from SEK36.2 billion thanks in part to the inclusion of the recently acquired Marconi.
Analysts polled by SME Direkt had expected net profit of SEK6.28 billion and revenues of SEK41.7 billion.
Ericsson's closely watched operating margin fell slightly to 21.5% from 21.6% despite the SEK2 billion in operating profit contribution from Sony Ericsson, a joint venture of Sony Corp. and Ericsson; because of lower margins at Marconi; and some large services contracts signed with Hutchison Whampoa in 2005.
"The results were overall good and the report contained essentially everything we wanted. However revenues were slightly weak," said Mattias Cullin, an analyst at HQ Bank in Stockholm.
Cullin, who has a buy rating on Ericsson's shares, noted that the revenue shortfall was entirely attributable to inventory trimming at U.S. operator Cingular Wireless and that it should recover in the fourth quarter.
Ericsson's Chief Executive Carl-Henric Svanberg said in an interview on Swedish Radio that activity level in the market had been high and that Ericsson had won market shares.
Svanberg also said the integration of Marconi is now largely over.
"The Marconi operation's margins should be close to those of Ericsson in the fourth quarter," Svanberg said.
In the third quarter Ericsson took charges of SEK2.2 billion related to restructuring at Marconi and SEK700 million related to a career change program for employees in Sweden. The charges were more than offset by a gain of SEK3 billion related to the sale of a defense business to Saab AB (SAAB-B.SK).
Ericsson said it expects the market for mobile telecommunications infrastructure using the GSM and WCDMA standards to grow moderately in 2007.
The company projects its addressable market for professional services in the telecom sector to show good growth in 2007.
Ericsson's shares were down 0.4%, or SEK0.10, at SEK26.50 in pretrading with Fisher Partners in Stockholm.
Company Web site: http://www.ericsson.com
-By Magnus Hansson, Dow Jones Newswires;+46 8 545 130 91, magnus.hansson@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 19th October 2006
