Ericsson suffers 63 per cent profit drop in Q2

By Peter Gothard
19 Jul 2012 View Comments
Ericsson CEO Hans Vestberg

Ericsson has seen a 63 percent year-on-year profit dip in Q2 2012, seeing its profits plummet from SEK 3.2bn in 2011 to only SEK 1.2bn in just a year.

Ericsson's woes have been echoed throughout the industry in the past year as other mobile network manufacturers, including Alcatel-Lucent in France and ZTE in China, have been feeling similar pain.

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The reasons for decresed profits, Ericsson's chief executive Hans Vestberg has said, is due to a general slump for mobile operators internationally.

"[It is] mainly due to the expected decline in CDMA equipment sales as well as lower business activity in China, including weaker sales of GSM and lower 3G sales in Russia," Vestberg said.

Further, Vestberg explained how Ericsson had made a decision to try and boost revenue by taking on a large volume of lower-profit contracts in an attempt to raise market share. Vestberg cites this plan as reason for a "short-term profitability pressure."

It's a situation only too familiar to other once-great mobile manufacturers. Nokia-Siemens has also posted an 8 per cent profit drop today, seeing totals fall from €3.64bn to €3.34bn over the last year. RIM, too, suffered a catastrophic loss last quarter.

Ericsson sold the mobile phone handset arm of the business to Sony back in February 2012, when Sony bought Ericsson's remaining 50 percent share in the business for $1.47 billion.

While this could have been construed, in light of today's news, as an act of desperation to maintain cashflow, Sony's Ericsson brand has done no better, joining other mobile phone manufacturers in an increasingly energetic race for survival in a market ruled by high-level innovation.

Sony Ericsson itself managed to post a £13m profit in April this year, but this was dwarfed by comparison with Apple's £7.2bn. Nokia and Siemens have seen similar tumbles in their own mobile handset divisions.

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