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Ericsson Q3 Profit Climbs Despite Component Shortages

Oct 25, 2010 (11:10 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=227900735





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Component shortages continue to plague the telecommunications infrastructure industry, Ericsson said in announcing improved third-quarter results even as the company prepared to deploy its flagship LTE project: Verizon Wireless’ 38-city LTE network.

Involved in trials and early deployment of some 50 LTE networks worldwide, Ericsson said that mobile broadband deployment continues to grow robustly in North America and Japan. Because of its network infrastructure strengths, Ericsson -- which became the world’s dominant LTE infrastructure provider after it acquired Nortel Networks’ LTE unit last year -- continues to be a bellwether for worldwide network activity. Ericsson’s third-quarter verdict was: Deployments are continuing, but components are slowing down rollouts.

“A key priority has been to mitigate the effects of industry-wide component shortage and supply chain bottlenecks,” said Hans Vestberg, Ericsson’s president and CEO, in announcing third-quarter results. “The situation has gradually improved during the quarter, but it remains a challenge to fully meet the demand for mobile broadband. While the supply chain bottlenecks have been resolved, the industry-wide component shortage remains.”

Ericsson’s sales climbed slightly, to $7.1 billion year over year, and profit jumped to $542 million from $120 million. North America was a particularly bright spot for Ericsson as sales there increased by 223% year over year. Ericsson cited prepaid data services and pointed to prepaid provider MetroPCS’s pioneering rollout of its LTE service. Operators are introducing tiered price plans baed on quality and performance, Ericsson said.

Mobile broadband is deploying across the world, with WCDMA networks already covering 35% of the world’s population, Ericsson said. Most of those networks have launched HSPA. Reading between the lines of the Ericsson report, the spectrum crunch, which is well under way in the United States, appears to be developing throughout the world. “Ericsson findings based on measurements in live networks show that global mobile data traffic more than doubled between second-quarter 2009 and second-quarter 2010,” the company said. “And mobile data traffic is forecast to almost double annually over the coming years, primarily driven by 24/7 connectivity and usage of smartphones, tablets and laptops.”

Ericsson also celebrated the third successive quarter of profits at Sony Ericsson, after a tough period of financial losses and large job cuts. However, its other major joint venture -- ST-Ericsson -- logged an increase in its losses, to $121 million from $112 million in the previous year’s quarter.