Ericsson announced its first-quarter earnings, posting a 35 percent fall in net profit due to higher restructuring costs and weak results from its handset venture, Sony Ericsson.
The company said net profit in the quarter was $210 million compared with $323 million in the same period a year ago.
While losses in the handset division were expected, the company said its mobile broadband infrastructure division remained strong. That segment’s sales increased by 12 percent to $6.1 billion from $5.4 billion a year ago.
“The effects of the global economic recession on the global mobile network market are so far limited,” Ericsson CEO Carl-Henric Svanberg said in a statement.
However, Svanberg also said that some operators are more cautious with longer-term investments in fixed networks, and some investments have been postponed in markets where local currencies have weakened.
Svanberg also said Ericsson’s joint ventures, Sony Ericsson and wireless technology firm ST-Ericsson, are affected by the economic downturn and the sharp drop in consumer demand for handsets. ST-Ericsson, the 50/50 joint venture with STMicroelectronics, reported an operating loss of $98 million for its first two months of operation.
“There is nothing to do but just adapt to these realities and that is why at both Sony Ericsson and ST-Ericsson there are pretty extensive cost reduction programs, in some cases 20 to 25 percent…and there’s just no way around that,” Svanberg said.
The company’s share in earnings from the joint ventures fell to a loss of $273 million in the first quarter from a profit of $112 million a year ago.
Filed Under: Infrastructure