Feature Article

November 06, 2012

Ericsson to See Slow but Steady Growth in Services and Core Mobile Networking Segments

While the global mobile networking industry grows steadily, so too do its most important players. Swedish telecommunications equipment maker Ericsson said on Tuesday that it expects slower expansion in the more profitable services segment of its business and the same level of growth in its core mobile network equipment market. 

The slow but steady growth has been attributed to competition and increased product commoditization, both of which have pressured prices in the industry for years. Europe's debt crisis and weaker global growth hasn’t helped speed the industry along, even if it’s moving in (more or less) the right direction.

The result is that Ericsson has seen profitable network sales slipping while it has gained from telecoms carriers outsourcing many of their operations, boosting sales of services like network management, reported Reuters today.

"This development will naturally imply a future business mix for Ericsson with more recurring software and services revenues," Ericsson CEO Hans Vestberg said in a statement this week. "However, hardware will always be part of the mix and a key differentiator for Ericsson."

Ericsson expects the market for telecoms equipment to show compound annual growth of 3 to 5 percent over the 2012 to 2015 period – the same as its previous forecast for 2010-2013.

The Stockholm-based company, which the world's biggest supplier of mobile network infrastructure said expected growth of 4 to 6 percent in key segments of the overall market, saw a slightly slower expansion in services compared to recent years.

Services have grown rapidly in recent years and hit 45 percent of group sales in the third quarter.

In the third quarter, Ericsson's core profit fell 42 percent due to slower orders and a shift in business mix to less profitable contracts, reported Reuters.

Edited by Braden Becker

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