STOCKHOLM—Swedish mobile network giant Ericsson on Friday said
mobile broadband sales in North America stabilized in the quarter
but remained lower on the year as it reported a 19% slide in
second-quarter net profit.
Net profit fell to 2.09 billion Swedish kronor ($244.9 million)
in the second quarter from 2.58 billion kronor in the same period a
year earlier as higher costs from an ongoing restructuring program
offset a rise in sales. The profit undershot analysts' expectations
of 2.57 billion kronor, according a FactSet poll.
Net sales increased to 60.67 billion kronor, higher than 54.85
billion kronor a year earlier, and above analysts forecast for
57.94 billion kronor. Sales adjusted for comparable units and
currency fell 6% on the year and the company's closely watched
gross margin, which has been under pressure over past years, shrunk
to 33.2%, down from 36.4% a year earlier.
Ericsson faces a number of challenges ahead. The company is
under pressure to defend its leading position as a
network-equipment provider after Finnish rival Nokia Corp.'s $16.6
billion acquisition of France's Alcatel-Lucent is set to create a
giant with sales on par with the Swedish company.
At the same time, the company is entangled in a legal dispute
over mobile technology patents with iPhone maker Apple, with the
companies suing and countersuing each other in the U.S. Ericsson is
also suing Apple in Europe and said it expects hearings and trials
in the various cases to begin in December and continue into 2016,
with the first court rulings by a Germany court seen in the first
quarter of next year.
Analysts also worry that Ericsson's profitability is coming
under pressure as a slowdown in well-paid network deals in the U.S.
have coincided with a fast-paced growth of less-lucrative contracts
for fourth-generation networks in China.
Ericsson said the mobile broadband business in North America
stabilized in the quarter, but remained at a lower level than a
year ago. It said the decline was partly offset by an increased
pace of fourth-generation network sales in China and strong sales
growth in the Middle East, India and South East Asia.
"The consolidation in the industry continues, both among vendors
and customers, creating opportunities and challenges," Chief
Executive Hans Vestberg said.
Write to Anna Molin at anna.molin@wsj.com
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