Ericsson steadies the ship with solid Q2 financials, driven by its networks division

Ericsson reported its second quarter financials earlier today, and delighted investors with a solid set of numbers, including a recovery in its networks business. Markets sent its share price up 8 per cent on the news.

Revenue for the quarter was SEK 54.8 billion (€5.9 billion), down 1 percentage point from Q2 last year, although up 15 per cent from Q1. Net income was up 76 per cent year-on-year to SEK 2.7 billion (€292 million), and up 57 per cent on Q1.

Ericsson said that sales in the quarter were driven by growth in the Middle East, China and India, as well as continued capacity business in North America. However, this was offset by lower revenues from two large mobile broadband coverage projects in North America and reduced activity in Japan. Political unrest is blamed for poor sales in parts of the Middle East and Africa.

“After a slow start of the year, we are executing on previously awarded 4G/LTE contracts in Mainland China and Taiwan,” commented Hans Vestberg, President and CEO of Ericsson. “Furthermore, the investment climate in India is improving following the concluded spectrum auctions and government elections held in May.”

Video: CEO & President Hans Vestberg comments on Ericsson's second quarter financial results of 2014: http://t.co/TrEp5ZDPld

— Ericsson (@ericsson) July 18, 2014

The Networks division contributed 53 per cent of the revenues, with Global Services accounting for 42 per cent. Support Solutions made up the balance, with the new Modem division yet to generate any sales – although this is expected by the end of the year, as its products start to appear in OEM mobile devices.

The majority of the three per cent sales growth year-on-year within Networks was due to radio access products, supported by IP Edge and IMS solutions. Ericsson sees increased mobile broadband demand, VoLTE, carrier aggregation, small cells and LTE broadcast as future business drivers.

Global Services continued its steady quarterly sales decline, due to reduced network roll-out activities. However, ‘professional services’ (which accounts for 72 per cent of the division’s sales) held steady. The company hopes that is acquisition of Red Bee Media will result in business growth from the TV and media sector.

Geographically, it’s North America that continues to be Ericsson’s largest market by some considerable margin, accounting for 28 per cent of its quarterly revenue – but only when compared with Ericsson’s breakdown of 11 separate regions. If you take EMEA as a whole, it comes out on top with 35 per cent, with Asia-Pacific at 21 per cent.

“In a transforming ICT market, we continue to evolve through investments in both our core business as well as in new and targeted areas,” said Vestberg.