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Ericsson 3Q Margins Miss as Carriers Slow Investments

Thu, 10/24/2013 - 9:28am
Andrew Berg

Wireless equipment maker Ericsson AB reported revenue of $8.3 billion, down 2.9 percent over the same quarter last year. 

Profit margin were off what analysts had expected as well. Third-quarter gross margins hit 32 percent, up two precent annually. Analyst expectations had been closer to 33 percent.

Net income for the quarter was $459 million but missed and profit was up 34 percent annually. The company said profits were helped along by an exit earlier in the year from the unprofitable joint venture with STMicroelectronics.  

The drop in sales and margins was mainly due to the slowdown in carrier investments, as many operators in developed markets are nearing the completion of major network initiatives. 

In a statement, Ericsson president and CEO Hans Vestberg, acknowledged the company's sales are seeing pressure. 

"The major drivers for this development are the two large mobile broadband coverage projects, which peaked in North America in the first half of 2013. We also saw impact from reduced activity in Japan where we are getting closer to completion of a major project," Vestberg said. 

Nokia Siemens and Ericsson each landed 11 percent shares of of the $3.2 billion worth of the contracts to build out China Mobile's TD-LTE network. Alcatel-Lucent secured a 13 percent share of the business, while Huawei and ZTE snagged 50 percent of the business. 

Shares of Ericsson were down over 5 percent in pre-market trading to $12.36. 

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