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Ericsson Beats Expectations

The wireless equipment maker reported a better-than-projected $390 million profit in the first quarter.
STOCKHOLM, Sweden (AP) -- Wireless equipment maker LM Ericsson posted an unexpectedly large first-quarter profit Friday, citing increasing demand from mobile phone operators expanding their networks.

The world's largest supplier of equipment for wireless phone networks reported a profit of 3 billion kronor ($390 million) for the January-March period compared with a loss of 4.3 billion kronor in the same period last year.

Analysts had expected the company to post pretax profits of about 3.2 billion kronor ($418 million). Its actual pretax profit was 4.3 billion kronor ($558.2 million).

Sales grew 9 percent to 28.1 billion kronor ($3.7 billion), led by high-growth markets such as China, Brazil and Mexico, the Stockholm-based company said.

"We have clearly strengthened our market position since last summer," Ericsson chief executive Carl-Henric Svanberg said. "Our year has started well with a number of contracts in key growth areas."

Net profit was slightly higher than expected, while sales were in line with analysts' expectations.

Orders booked in the first three months of 2004 were 33 billion kronor ($4.3 billion), up from 27.1 billion kronor a year ago, said Ericsson.

The company predicted "slight to moderate growth" in the market for mobile network equipment, saying operators are expanding existing networks and continuing the rollout of 3G technology, which lets mobile phones use video and Internet connections at about 40 times the speed of the current widespread standards.

"Their order book looks very good and the adjusted gross margin is good," said Greger Johansson, a telecom analyst with Nordea Bank. "What's bad is they don't give a forecast for the second quarter and their forecast for the year is quite conservative."

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.