Ericsson Second-Quarter Net Misses Estimates on Job-Cut Costs

Ericsson AB, the world’s largest maker of wireless networks, reported a 66 percent increase in second-quarter profit, missing analysts’ estimates, on costs related to job cuts and slower services growth.

Net income climbed to 3.12 billion kronor ($488 million) from 1.88 billion kronor a year earlier, Stockholm-based Ericsson said today in a statement. Revenue rose 14 percent to 54.7 billion kronor. Analysts had predicted profit of 3.88 billion kronor on sales of 54.5 billion-kronor, the average estimates compiled by Bloomberg show.

Ericsson said it had one-time restructuring costs of 1.3 billion kronor related to job cuts in Sweden.

Wireless vendors are competing to control base stations used by third-generation, or 3G, mobile-broadband networks to prepare for fourth-generation technology coming into use in the U.S. and Europe. Sales of older second-generation networks, which don’t offer quick access to the Internet, are declining.

“In the quarter we saw a change in market mix where Brazil, China, Germany, Korea, and Russia showed especially strong growth both year-over-year and sequentially,” Chief Executive Officer Hans Vestberg said in the statement. “The U.S. maintained its high business activity although sequentially the networks business was somewhat slower.”

Ericsson bolstered its U.S. sales when it bought Nortel’s North American wireless unit in 2009 as the Canadian former rival started to break up. That made the U.S. the company’s biggest market, ahead of China and India.

The U.S. market is important for Ericsson as AT&T Inc. and Verizon Wireless add capacity to keep up with data demand from smartphone and tablet customers.

Huawei Technologies Co. and ZTE Corp., Chinese manufacturers that have driven down prices and grabbed market share in other regions as they expanded, don’t win contracts in the U.S. because of security concerns.

Ericsson announced orders in the quarter for fourth- generation networks for Rogers Communications Inc. in Canada, LG Uplus Corp. in South Korea and the Australian government’s NBN Co. broadband-network developer.

The Swedish company generated about 39 percent of revenue last year from services, including outsourcing contracts to manage entire telephone networks. It agreed in June to buy Telcordia Technologies Inc., adding software and services for clients who choose not to outsource their network management.

Ericsson led the wireless-equipment industry with a 34.5 percent market share in the first quarter, according to Redwood Shores, California-based researcher Dell’Oro Group. Nokia Siemens followed with 20.3 percent, about tying with Huawei at 20.3 percent. Alcatel-Lucent’s share was 13.7 percent.

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