Ericsson net profit more than halves in Q2 2012

18 July 2012 | Kavit Majithia


European hardware manufacturer Ericsson has seen its net profit more than halve in its Q2 results this year.

Ericsson saw its profit drop to 1.2 billion Swedish crowns, from 3.2 billion Swedish crowns the year before. The company’s revenue actually increased by 1% to 55.3 billion Swedish crowns, but its network business took one of the biggest hits, with sales down by 17%.

A poor set of products, in addition to declining sales for CDMA equipment in the US and slower activity in key markets like Russia and India, are thought to be the underlying reasons for such a sharp decline.

Ericsson cited modernisation projects in Europe as causing the negative impact on gross margin, which will begin to be curbed at the end of 2012. “The underlying business mix, with higher share of coverage projects than capacity projects, was unchanged in the quarter and is expected to prevail short-term,” said the company in a statement.

Vendors across Europe have been largely affected by declining sales in telecoms hardware equipment, like base stations for example, in addition to a continuing price war with rivals, which is also lowering profit. European vendor Alcatel-Lucent reported a €40 million operating loss just yesterday.