Ericsson's Hits and Misses
By Carlo Longino, Fri Oct 22 19:45:00 GMT 2004
Ericsson says its third-quarter profits jumped higher, but gave a cautious outlook. Plus, earnings news from Nextel.
The world's top mobile network gear vendor, Ericsson, said it earned 4.8 billion kronor ($667 million) in the third quarter, compared to a loss of 3.9 billion kronor a year ago. Sales were up 14 percent over the period to 31.8 billion kroner, and while the figures came in on par with analyst and investor expectations, the company gave a very cautious outlook for the rest of the year and 2005, sending its shares down.
This was Ericsson's fourth straight quarterly profit after some hard times for the company after the telecom bust, and perhaps investors let their hopes outpace the company's turnaround, but Ericsson says that the catch-up spending phone companies were doing after 3 years of cutbacks is starting to slow. Affecting the current quarter was a slowdown in Chinese spending as well as from AT&T Wireless and Cingular in the runup to their merger.
Nokia upped its forecast for the networks market when it reported its earnings earlier, saying it expects "slight to moderate growth" for the whole year, while Ericsson's sticking to just "slight" growth for 2005. Analysts see the market growing about 10 percent next year. One area in which Ericsson is trying to focus are emerging markets, where it gets about half its sales.
US carrier Nextel said it added 550,000 new subscribers in the quarter and profits rose 69 percent over last year on an 18 percent jump in sales. Nextel's youth-focused brand-within-a-brand, Boost Mobile, added 195,000 prepaid customers in the quarter, which dragged down total ARPU $2 to $69, but highlights the strength of the US MVNO sector alongside the user adds Sprint's MVNO customers saw in the quarter.