By Sven Grundberg
STOCKHOLM--Sweden's Ericsson reported an unexpectedly sharp
decline in revenue for the first quarter on Wednesday, blaming
lower revenue in North America and Japan.
The mobile network company's revenue in the first quarter
totaled 47.51 billion Swedish kronor ($7.21 billion), down from
52.03 billion kronor a year earlier and below analysts' average
forecast of 50.80 billion kronor.
Ericsson's Chief Executive Hans Vestberg said the revenue drop
was largely a result of lower revenue from two large mobile
broadband coverage projects in North America, which peaked in the
first half of 2013, as well as reduced activity in Japan, where
operators have slowed down investments into new fourth generation
mobile data networks.
In North America--Ericsson's single largest market--overall
revenue fell 23% in the first quarter compared with the same period
a year earlier, while sales in North East Asia declined 19% on the
year. The dismal developments in North America and Japan were
partly offset by growth in China, the Middle East and Latin
America.
While industry observers are widely expecting operator
investments in Europe to pick up following the prolonged economic
slump in the region, sales in Western Europe remained roughly flat
in the first quarter, compared with a year earlier. Ericsson,
however, said it has been awarded a five-year contract from
Vodafone Group PLC as part of the mobile operator's effort to beef
up its networks, an initiative dubbed Project Spring. Ericsson
didn't disclose the size and scope of the contract.
On a more positive note, a more favorable business mix, with a
smaller share of low-margin network rollout projects, bumped
Ericsson's closely watched gross margin to 36.5% in the first
quarter, from 32% a year ago, and helped boost the company's
profit.
Ericsson's net profit came in at 2.12 billion kronor, up from
1.21 billion kronor a year ago. Operating income increased 25% on
the year to 2.63 billion kronor.
Write to Sven Grundberg at sven.grundberg@wsj.com
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