Ericsson CEO Carl-Henric Svanberg said that in a period of vendor consolidation, it has chosen to secure its scale advantage in mobile networks through organic growth. This strategy has been effective but comes at a certain cost. Now that we have re-established our scale advantage we will now capitalize on our gains and leading position, he said.
Ericsson blamed its poor third-quarter performance on mobile operators putting off upgrades and this led to a 35.5% fall in net income to SEK 4bn ($617.3m) on revenue that rose 5.3% to SEK 43.5bn ($6.7bn).
Networks sales fell 2% to SEK 28.5bn ($4.39bn) and Svanberg said that business continued to develop most rapidly where new network build-outs and break-in contracts were predominant and pricing pressure most intense. However, this had been offset by higher margin sales of software, expansions, and upgrades to its installed base. While it expects these higher margin sales to gradually resume, new network build-outs will continue to weigh on margins for several quarters.
For the year as a whole, Ericsson predicted that that the GSM/WCDMA market will continue to show mid-single digit growth while the addressable market for professional services will show good growth. It expects that in 2008 current market conditions will prevail.
