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Ericsson Sees Steady Growth for Network Equipment Market

Wed, 11/06/2013 - 10:41am
Andrew Berg

Ericsson expects steady growth rates comparable with last year for the network equipment market. 

During the company's 2013 Investor Day, Ericsson said it estimates that the total network equipment market will show a Compund Annual Growth Rate (CAGR) of 3-5 percent. The company estimated telecom services to show a CAGR of 5-7 percent, and the market for support solutions is forecasted to show a CAGR of 9-11 percent.

Ericsson CEO Hans Vestberg said in comments that key to achieiving profitablity for his company in 2014 will be monetizing the investments in footprint that the company has established in Europe; continued structural improvements to shorten order-to-cash cycle time; and to evolve the infrastructure software model to fit an ICT environment.

"Looking at sales growth in a longer perspective, it is encouraging to see that we grew twice as fast as the market in 2010-2012, currency adjusted. This is proof that our strategy is effective and that we are delivering real value to our customers," Vestberg said. 

Ericsson recently reported 3Q 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.

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. 

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