Ericsson continued to see profits rise in the third quarter despite falling revenues.
Profits rose 38 percent year-on-year, to €342 million, driven by higher gross margin due to the “less dilutive impact” from European network modernization and a “somewhat improved” business mix.
However, revenues fell three percent to €6 billion between July and September, principally as a result of what CEO Hans Vestberg described as “continued currency headwinds”.
When adjusted for foreign exchange (FX), sales for comparable units grew three percent, according to the CEO.
CFO Jan Frykhammar told European Communications that FX problems are a business reality that the vendor “has to live with” in the short term. “Our principal strategy is to work with natural hedges, but in the long-term we work on matching revenue and cost per currency,” he said.
Sales in the Sweden-based vendor’s Network and Global Services divisions both fell one percent, but it was again the company’s support solutions division that caused the most concern.
Revenues there fell 29 percent to just €274 million. But Frykhammar said “real decline” is around 16 percent when last year’s divestitures are factored in.
He also pointed to the April acquisition of Microsoft’s Mediaroom business, which will be part of Ericsson’s Q4 financials.
"We are currently seeing sales coming under some pressure,” commented Vestberg in the statement outlining the results. “In addition to FX, 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.”
The “pace is picking up” in the European market, according to the CEO, thanks to continued growth in WCDMA/LTE investments.
“Ericsson now sees growth in several European markets and margins are also improving as the network modernization projects gradually come to an end and we engage more in new capacity and LTE business,” he added.
Frykhammar said the company is not going to change its strategy: “We are looking for gradual improvements. We are doing the right things and continuing to invest in a strong portfolio.”