Ericsson Races Past 2Q Expectations - InformationWeek
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7/21/2004
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Ericsson Races Past 2Q Expectations

Profits rose sharply thanks to growing demand and the benefits of cost-cutting.

STOCKHOLM, Sweden (AP) -- Wireless equipment maker LM Ericsson on Wednesday reported a strong gain in second-quarter profits, citing growing demand from mobile phone operators for its network devices and payoffs from a cost-cutting spree last year that saw the company trim thousands of jobs.

The world's largest supplier of equipment for wireless phone networks reported a profit of 5.3 billion kronor ($710.1 million), or 0.33 kronor (4 cents) per share, for the April-June period compared with a loss of 2.7 billion kronor, or 0.17 kronor per share, in the same period last year.

Analysts had expected the company to post pretax profits of about 5.5 billion kronor ($736.9 million). Its actual pretax profit was 7.7 billion kronor ($1 billion).

Sales grew 18 percent to 32.6 billion kronor ($4.4 billion), led by the rollouts of third-generation cellular networks throughout Asia, Europe, and parts of North America, the company said.

For the first six months of the year, Ericsson said its net income was 8.3 billion kronor ($1.1 billion), compared with a loss of 7 billion kronor in 2003.

"Confidence has returned to the industry," Ericsson president and chief executive Carl-Henric Svanberg said, adding that third-generation rollouts, expansion of GSM capacity worldwide, and upgrades by operators to Edge networks drove the momentum.

Third-generation networks offer faster delivery of data and pictures than current networks. Initially, operators had slowed the launch of 3G because of a dearth in handsets for consumers, but with the rollout of new phones, the networks have started gaining in popularity.

Edge networks, like 3G, offer high-speed data service for cellular users.

"With new and expansion contracts across all regions we are capitalizing on our technology leadership, our large installed base as well as our particularly strong position in high growth markets," he said.

Svanberg said the company was cautiously optimistic about its growth and sales for the rest of 2004, noting that operators are bringing in more subscribers and looking to expand their networks to make services faster and offer more high-speed service.

The company cited continued growth in Europe and said Asia, led by China and India, are becoming major markets for its products.

After more than two years in the red, Ericsson swung to a profit in the last quarter of 2003, as the ailing telecom market started showing signs of recovery. The company is also seeing the results of a restructuring effort that has reduced staff levels from 107,000 in 2001 to 51,000 at the end of March 2004.

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