Ericsson posts better-than-expected profit

Swedish telecom equipment company Ericsson posted a stronger-than-expected fourth-quarter profit yesterday, promising deeper savings as it announced 5,000 job cuts.

The company, which released the results more than a week ahead of schedule for a fourth consecutive forecast-topping report, also failed to give a specific business outlook. That gave analysts some pause for thought.

Ericsson made an operating profit of SEK9.2 billion (Dh3.9bn) in the quarter, excluding restructuring costs of SEK3bn and including a capital gain of SEK0.8bn.

The outcome compared with SEK7.6bn a year earlier and a median forecast in a Reuters poll of SEK6.7bn, excluding non-recurring items of SEK1.4 billion.

"The fourth quarter is very, very strong," said Greger Johansson, an analyst at Redeye.

"But at the same time, they take away the planning assumption and increase savings, and that implies their view of 2009 has been lowered," he said.

"They do not give much guidance, and I think that some people will get worried about the fact that they do not say anything about 2009." Ericsson's closest rivals – Nokia Siemens Networks and Alcatel-Lucent – have forecast for the market to shrink this year as telecoms operators cap spending and Asian rivals put pressure on prices.

Only this month, Nortel Networks, North America's biggest telecom gear maker, filed for bankruptcy.

Ericsson sales shot up to SEK67bn, from SEK54.5bn a year earlier, exceeding a median forecast for SEK56.7bn.

Chief Executive Carl-Henric Svanberg said there was good demand for the group's entire portfolio across the world, although he also acknowledged currency movements were a factor in the fourth quarter.

Svanberg said the global financial crisis was so far not affecting the mobile infrastructure market much as operators had healthy financial positions and traffic was growing briskly.

However, he warned the crisis was likely to have an impact this year.

"To date, our infrastructure business is hardly impacted, but it would be unreasonable to think that this would be the case in 2009," Svanberg said.

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