By Gustav Sandstrom
STOCKHOLM—Telefon AB L.M. Ericsson /zigman2/quotes/207544813/delayed SE:ERIC.B -3.64% , the world's largest maker of telecommunications-network equipment, said Friday that first-quarter net profit fell 26%, hit by lower gear sales and restructuring charges.
The Stockholm-based company posted net profit of 1.26 billion Swedish kronor ($174.4 million) for the three months to March 31, compared with 1.72 billion kronor a year earlier. Sales fell 9% to 45.11 billion kronor from 49.57 billion. Analysts had forecast, on average, net profit of 1.79 billion kronor on sales of 47.85 billion kronor.
Along with rivals, Ericsson has suffered in the last year from weak demand in several markets as the operators that buy its equipment spent cautiously in the economic downturn.
"Operators in a number of developing markets were still cautious with their investments, which impacted Networks' sales," said Chief Executive Hans Vestberg .
Rival Nokia Siemens Networks, a joint venture between Nokia Corp. and Siemens /zigman2/quotes/200873563/delayed DE:SIE 0.00% AG, on Thursday posted a narrower first-quarter loss as cost cuts compensated for lower sales, and said it expects its markets to remain flat in 2010 from the previous year.
Ericsson said continued strength in the service business only partly compensated for weaker networks sales. The latest quarter was also hurt by restructuring costs of 2.2 billion kronor related to its continuing cost-cutting program. Ericsson said it aims for annual savings of between 15 billion kronor and 16 billion kronor by the second quarter.
Operating profit in the first quarter increased to 1.98 billion kronor from 1.78 billion kronor. Gross margin stood at 36.8%, up from 35.5% a year earlier, boosted by efficiency gains and an improved business mix.
Ericsson's share in earnings from joint ventures improved to a 372 million kronor loss from a 2.24 billion kronor loss, helped in particular by stronger sales and margins at Sony Ericsson, its mobile-phone joint-venture with Japan's Sony /zigman2/quotes/201361720/delayed JP:6758 -0.67% Corp.
Write to Gustav Sandstrom at email@example.com