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Ericsson LTE Rollouts Slowed By Component Shortages

Sales were down 8% in the second quarter, while profits nearly doubled on handset maker Sony-Ericsson's success.
As the world's largest network equipment supplier, Ericsson is poised to roar ahead with new deployment -- particularly for Long-Term Evolution networks -- but when the firm reported its second-quarter results, it said its rollouts have been slowed by component shortages.

Sales were down 8% to $6.5 billion and its profits nearly doubled to $258 million. The profit was aided considerably by the turnaround logged by its partnership with mobile phone maker Sony-Ericsson.

Beefed up by its acquisition of Nortel Networks' LTE/CDMA unit, Ericsson is on the verge of leading infrastructure deployment of LTE networks worldwide. It has said it plans to lead or play significant roles in deploying LTE in some 50 global networks. In the United States, It is a key provider to Verizon Wireless' LTE network, which is scheduled to launch by the end of the year.

But for Ericsson's second quarter, the key has been a components shortage, which has tamped down its revenue.

Ericsson CEO Hans Vestberg said the components shortage is industry-wide. "We share the same suppliers with consumer electronics makers and others," said Vestberg. "There is a fierce competition for those components."

Vestberg said he believes the components pipeline will open up soon, although other networks providers don't look for much of a supply improvement for several months.

Ericsson has been digesting the Nortel acquisition, which solidified its position as the leading LTE infrastructure provider. It also gained an important beachhead in South Korea with its acquisition of Nortel LG, now Ericsson LG.

"Over the past years, we have gone through major changes with cost reductions and strengthened portfolio and market presence while maintaining our technology leadership," said Vestberg. "The cost reduction program initiated in the first quarter 2009 has been completed, reaching its target. Going forward, cost and capital efficiency will remain top of our agenda."