Ericsson’s weaker sales of mobile network upgrades affects Q3 profit

October 25, 2015

In its third quarter report for 2015, Swedish group Ericsson, one of the world's largest wireless network makers, blamed its sharp decline in profit during the quarter on weaker sales of mobile network upgrades and expansions.

Combined with continued high sales of new network buildouts, the changed business mix within networks affected group margins negatively. All other businesses performed as expected.

Ericsson’s CEO admitted that the effect of market dynamics is always a matter of judgment, and that the company underestimated the effects in this quarter.

Net profit for the July to September 2015 period fell by 36% to €432m (3.97bn kronor). Sales in the quarter, however, rose slightly to €4.73bn.

Ericsson’s networks business continues to develop most rapidly in regions where new network rollouts and break-in contracts are predominant. This is where competition is intense as it builds footprint for long-term profitable growth.

Up to now the margin pressures from these business activities have been offset by higher margin sales such as network expansions and upgrades. Such expansions and upgrades have a short sales cycle and builds during the quarter.

During the third quarter, sales of these higher margin offerings did not materialise as much as in previous quarters.

Ericsson has made cuts in its outlook for the rest of the year.