Ericsson's Shares Soar on Better-than-forecast Sales, Profit

LONDON (Dow Jones) -- Shares of Ericsson soared 22% Friday after the world's largest maker of mobile networks posted better-than-expected sales and profit in the first quarter.

Net income for the three months to March 31 fell 55% to 2.65 billion Swedish kronor ($446 million), or 0.17 kronor a share, from 5.82 billion kronor, or 0.37 kronor a share, earned in the year ago period. The first quarter of 2008 included a restructuring charge of 800 million kronor. Consensus forecasts were for earnings of 0.16 kronor a share, according to Bank of America.

Ericsson is in the process of cutting 4,000 jobs, including 1,000 in Sweden, to rein in costs during a difficult year for the industry.

Ericsson shares were last up 22% in Stockholm morning trading.

Sales climbed 4.8% to 44.18 billion kronor on solid demand in Latin America and North America, beating consensus estimates of 41.9 billion kronor. In Europe, sales fell 7% year-over-year and 24% sequentially. In the U.S., they jumped 39% to 4.3 billion kronor.

"The sales development in the quarter reflects the demand for mobile infrastructure, especially in high-growth markets. Sales are picking up in the U.S. while Western Europe remains slow," Chief Executive Carl-Henrik Svanberg said in a statement.

He added that said sales growth and margins in the quarter were hurt by the continued weakness of the dollar. The U.S. dollar has lost about 8% of its value against the Swedish krona so far this year. Ericsson has nearly a 50% exposure to the dollar.

Ericsson reiterated its outlook for flattish growth in the mobile infrastructure market in 2008 and for good growth in the professional services market.

"We still find it prudent to plan for a flattish mobile infrastructure market," Svanberg said, adding that Ericsson's cost reductions as it adjusts to such a scenario are running according to plan. The company is targeting cost savings of 4 billion kronor annually that will have their full effect in 2009.

Ericsson shares have lost more than half their value since the company stunned investors with a profit warning in October. Ericsson attributed the miss to lower demand for high-margin network upgrades in North America and Western Europe.

In the past two years, the telecom-equipment sector has gone through a wave of consolidation. France's Alcatel merged with Lucent of the U.S. and Nokia set up a networks joint venture with Siemens. Ericsson, meanwhile, bought Marconi of the UK.

The key players were forced to add scale in response to the rising competitive threat from Asian vendors such as Huawei Technologies and consolidation among their customers, particularly in the U.S.

(END) Dow Jones Newswires

Posted to the site on 25th April 2008