Feature Article

January 31, 2013

Ericsson's Q4 Performance Better than Expected

French telecom equipment maker Ericsson's financial report was released on Thursday. The results indicate that the year ended with strong cash flow and a full-year cash conversion well above target.

As a result, the board of directors proposed a dividend for 2012 of SEK 2.75 (2.50) per share – an increase of 10 percent.

CNBC News reports that the shares of Ericsson rose 8.2 percent on Thursday, making it the best performer on the Euro Stoxx 600 Index, after the company reported fourth-quarter earnings. Similarly, investors cheered Ericsson's higher-than-expected core profit and revenue growth, as the firm begins to look beyond the global downturn.

In an exclusive interview, Ericsson president and CEO Hans Vestberg told CNBC, “Underlying consumer demand seems to be continuing."

"That is most important," added Vestberg.

Excluding charges, the earnings report shows that the earnings before interest and tax rose to $754 million from $644 million in the year-ago period, beating a Reuters forecast.

However, the company reported a net loss due to a $1.3-billion writedown for ST-Ericsson, a joint venture between STMicroelectronic and Ericsson.

Commenting on the results of the report, Vestberg said, “During the year, profitability was negatively impacted by operating losses in ST-Ericsson, the ongoing network modernization projects in Europe as well as the underlying business mix, with a higher share of coverage projects than capacity projects." 

The company indicated that with the present visibility of customer demands, and with the current global economic development, underlying business mix is expected to gradually shift toward more capacity projects during the second half of 2013.

Sales at the firm increased 5 percent year-on-year and 23 percent on the previous quarter. Regarding Blackberry 10 launch on Wednesday, Vestberg stated, "I have not seen it yet but I think all new devices coming into the market are great for infrastructure companies."

Edited by Braden Becker

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