Ericsson Reveals Lower than Expected 1Q Profit, But Improvement in Margins

A report issued by LM Ericsson Telephone Company, which is the global manufacturer of telecommunications network equipment, reveals, that the company experienced lower-than-expected first-quarter net profit.

This has been brought on by lesser gear sales and the added cost of restructuring. However, the company also revealed that underlying margins have boosted owing to improvement in efficiency.

The company, which is based in Stockholm, evinced that net profit dropped to 1.26 billion Swedish kronor ($173 million) for the first three months, which ended on March 31. Last year, the net income of the company was SEK1.72 billion.

Owing to the economic recession, Ericsson along with its competitors had experienced losses. The recession had lead to weakening of demand in many markets. The operators that purchase the equipment were cautious about spending.

However, the company revealed that the first-quarter gross margin increased to 36.8% from 35.5%, which was reported a year before. These margins outdo the estimated 35.4%, which has been brought on by efficiency improvements and a good business mix.

Chief Executive Hans Vestberg said, "Operators in a number of developing markets were still cautious with their investments which impacted Networks' sales”.