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UPDATE 1-Ericsson lags forecasts as network unit recovery falters
January 30, 2014 / 7:26 AM / 4 years ago

UPDATE 1-Ericsson lags forecasts as network unit recovery falters

* Ericsson Q4 sales, profits fall short

* Operating profit 9.1 bln SEK vs forecast 9.9 bln

* Proposes dividend of 3 crowns per share (Adds company comment, background, detail)

STOCKHOLM, Jan 30 (Reuters) - Mobile telecom gear maker Ericsson posted sales and fourth-quarter operating profit below expectations on Thursday and said network projects in China and Russia had not compensated for lower sales in North America and Japan.

After the global downturn, sales in Ericsson’s key Networks unit have been gradually recovering, but a previously flagged decline due to large projects coming to an end dragged down revenues and the fall could not be offset by growth in other regions.

Sales in networks fell 1 percent in the quarter from the same period a year earlier even though revenues got a boost from a patent deal with Korea’s Samsung and the unit’s operating margin was below expectations, despite low margin projects in Europe falling out of the mix.

“During the quarter the European network modernization projects continued to improve and were not dilutive to margins,” the company said in a statement.

While 2013 ended on a sour note for the world’s biggest network gear maker, analysts predict Ericsson sales will get a lift in 2014 in Europe and China where big carriers spend on high-speed 4G LTE networks to cope with a surge in data as consumers watch more video on their smartphones.

Vodafone, the world’s second-largest mobile operator and a big Ericsson client, has said it will spend spend 7 billion pounds ($11.6 billion) to boost coverage and speed in its networks through March 2016.

Ericsson’s earnings before interest and tax were 9.1 billion Swedish crowns ($1.4 billion) compared to 4.8 billion in the year-ago quarter, excluding the company’s joint ventures, missing a mean forecast of 9.9 billion in a Reuters poll of analysts.

Sales at Ericsson, the world number one mobile network equipment maker, were 67.0 billion crowns against a forecast of 69.3 billion. Sales and profit were boosted by a 4.2 billion crowns patent deal with Samsung.

The gross margin was 37.1 percent against a mean forecast of 36.7 percent. Ericsson proposed a dividend of 3.00 crowns per share, higher than the median forecast of 2.95 crowns per share.

$1 = 0.6041 British pounds Reporting by Sven Nordenstam and Simon Johnson; editing by Niklas Pollard

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