The FINANCIAL — Swedish mobile network giant Ericsson on July 17 said mobile broadband sales in North America stabilized in the quarter but remained lower on the year as it reported a 19% slide in second-quarter net profit, according to Nasdaq.
Net profit fell to 2.09 billion Swedish kronor ($244.9 million) in the second quarter from 2.58 billion kronor in the same period a year earlier as higher costs from an ongoing restructuring program offset a rise in sales. The profit undershot analysts’ expectations of 2.57 billion kronor, according a FactSet poll.
Net sales increased to 60.67 billion kronor, higher than 54.85 billion kronor a year earlier, and above analysts forecast for 57.94 billion kronor. Sales adjusted for comparable units and currency fell 6% on the year and the company’s closely watched gross margin, which has been under pressure over past years, shrunk to 33.2%, down from 36.4% a year earlier.
Ericsson faces a number of challenges ahead. The company is under pressure to defend its leading position as a network-equipment provider after Finnish rival Nokia Corp.’s $16.6 billion acquisition of France’s Alcatel-Lucent is set to create a giant with sales on par with the Swedish company.
At the same time, the company is entangled in a legal dispute over mobile technology patents with iPhone maker Apple, with the companies suing and countersuing each other in the U.S. Ericsson is also suing Apple in Europe and said it expects hearings and trials in the various cases to begin in December and continue into 2016, with the first court rulings by a Germany court seen in the first quarter of next year.
Analysts also worry that Ericsson’s profitability is coming under pressure as a slowdown in well-paid network deals in the U.S. have coincided with a fast-paced growth of less-lucrative contracts for fourth-generation networks in China.
Ericsson said the mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago. It said the decline was partly offset by an increased pace of fourth-generation network sales in China and strong sales growth in the Middle East, India and South East Asia.
“The consolidation in the industry continues, both among vendors and customers, creating opportunities and challenges,” Chief Executive Hans Vestberg said.