Published in News
Ericsson sees slower growth
But more profits in core network gear sales
Ericsson has announced that it expects slower expansion in the more profitable services segment of its business. CEO Hans Vestberg said in a statement that there will be some growth in its core mobile network equipment market.
He said that competition and increased product commoditisation have pressured prices in the industry for years. Life was being made miserable by Europe's debt crisis and weaker global growth. Vestberg said that Ericsson has seen profitable network sales slipping while it has gained from telecoms carriers outsourcing many of their operations, boosting sales of services like network management.
He said that this development will naturally imply a future business mix for Ericsson with more recurring software and services revenues. He said that Ericsson will always make hardware and this will be a key differentiator from other companies. The market for telecoms equipment to show compound annual growth of three to five percent over the 2012-2015 period, the same as its previous forecast for 2010-2013.
There would be growth of four to six percent in key segments of the overall market, but a slightly slower expansion in services compared to recent years. Services have grown rapidly in recent years and hit 45 percent of group sales in the third quarter, Vestberg said. In the third quarter, Ericsson's core profit fell 42 percent due to slower orders and a shift in business mix to less profitable contracts.
It expects this to continue over the next three quarters.