Ericsson reported Q1 net sales of SEK 42.2 (39.1) b., up 8% year-over-year, excluding divested operations. Earnings per share rose to SEK 0.37 (0.29), up 28% year-over-year.
“We have concluded another quarter with solid performance and market share gains in a stable growth environment,” said Carl-Henric Svanberg, President and CEO of Ericsson. “Sales growth in the quarter was primarily driven by Western Europe, and large turnkey projects in Central and Eastern Europe, Middle East, Africa and Asia Pacific. Our capability in managing such projects around the world is a competitive advantage. Margins remain stable, due to the benefits of scale and technology leadership. Our commitment to operational excellence continues and operating expenses grew less than 3 percent versus a sales growth of 8 percent.”
Some highlights:
- Networks: Ericsson said a 5% year-over-year sales increase in Networks was driven by growth in both fixed and mobile networks. The sales decline in North America due to the Cingular rollout peak in first quarter of 2006 is overshadowing the underlying growth in other parts of the world. Outside North America, growth amounted to 14% year-over-year. Operating margin was stable year-over-year.
The good demand for GSM continues. Growth is primarily driven by new network deployments and capacity expansions in high-growth markets. New features are still being added, for example super EDGE with 1 Mbps downlink. 3G/HSPA rollouts continue and new licenses have been or will be issued in several regions, also in developing countries. Sales of fixed networks grew slightly, excluding acquired sales, with increased sales of transmission products more than offsetting a decline of traditional circuit-switching equipment.
Ericsson also noted strong demand for Redback’s intelligent router and said demand for transmission equipment is growing.
- Professional Services — The Professional Services business continued to make advancements throughout all areas and sales grew by 15% year-over-year. Growth in local currencies, which better reflects the actual activity level as services business is local, amounted to 20%. Recurring services revenues amount to more than 60%.
- Multimedia — The Multimedia group, which includes service layer products, revenue management systems, enterprise solutions and mobile platforms as well as the two companies Tandberg Television and Mobeon (presently being acquired) recorded strong growth during the quarter with especially encouraging development in revenue management, primarily prepaid and mediation solutions, and mobile platforms. Operating margin increased year-over-year as a result of the good growth and the effects of restructuring of enterprise solutions operations. As a fairly new business activity, growth and margins may fluctuate over the coming quarters.
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