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The Journal Gazette

Wednesday, April 24, 2013 6:00 am

Ericsson Q1 profits dive on restructuring costs

The Associated Press

Wireless equipment maker Ericsson said Wednesday that a 2 percent gain in sales in the first quarter was not enough to prevent an 86 percent slump in net profit as it booked costs connected with downsizing its Swedish operations.

Sales rose to 52 billion kronor ($7.8 billion) as strong project growth in Europe and North America outpaced declines in key markets such as China and Japan. But profit fell to 1.2 billion kronor due to the extra costs and because the comparable figure a year earlier had been inflated by gains made from the sale of a stake in a venture with Sony Corp.

The world's largest supplier of mobile phone infrastructure has struggled in an increasingly competitive environment for building and upgrading mobile networks and system services. Last month the company announced it was splitting up another joint venture, with STMicroelectronics, one of Europe's largest chipmakers, after a fall in global demand.

CEO Hans Vestberg said, however, that underlying profitability of operations in the first quarter improved year-on-year after excluding restructuring charges.

Vestberg told a press conference that first quarter sales grew on an annual basis in eight of 10 regions worldwide, led by a 23 percent gain in North America. Sales in Latin America and northeast Asia, however, fell by 9 percent and 34 percent.

The company, based in Stockholm, said it expected a larger portion of its sales this year to come from network modernization as demand for larger, speedier networks increases and more consumers use smartphones and tablets.

Ericsson's shares were down 0.5 percent in early morning trading in Stockholm, though the company's share price was up nearly 18 percent from the start of the year.