Telecoms equipment firm Ericsson posted higher-than-expected core earnings this morning but said the impact of the economic downturn on its key mobile networks market had become more notable.
The world's top mobile equipment maker reported operating earnings of 6.9 billion Swedish crowns (€642.8 million) in the second quarter, excluding restructuring charges and its loss-making joint ventures.
That exceeded a mean forecast of 6 billion in a Reuters poll and 4.7 billion in the year-ago quarter.
"It's a bit of a mix. On the negative side we have the cautious comments on the macro environment - this will get noticed and should be seen as a warning sign for the later part of the year," West LB analyst Thomas Langer said.
Ericsson has so far been left largely unscathed by the economic downturn, sheltered by robust sales in China and strength in its services business, while growing its share of a shrinking market for mobile network gear.
Sales at the group rose to 52.1 billion crowns in the second quarter from 48.5 billion a year ago, just lagging the 52.9 billion seen by analysts. However, adjusted for comparable units and currency swings, sales were down 3 percent, it said.
However, many analysts expect worse to come as operators slash capital expenditure to weather deep recessions on both sides of the Atlantic, weighing on equipment sales for manufacturers such as Ericsson and competitor Nokia Siemens Networks.
Only this week, Norwegian operator Telenor cut its capital expenditure target as did Belgium's second-biggest mobile operator, Mobistar, majority-owned by France Telecom, and analysts at Morgan Stanley said more spending cuts were likely to follow.
“The effects of the global economic climate on the mobile infrastructure market are now more notable, especially in markets with currencies under pressure and tougher credit environment," said Ericsson chief executive Carl-Henric Svanberg.
Svanberg, due to step down at the turn of the year and assume the chairmanship of BP, said the firm's cost savings target remained at 10 billion Swedish crowns, from the second half of 2010.
Reuters