Ericsson AB’s share price down, posts first-quarter sales that fail to reach analysts’ estimates

April 23, 2014 10:01 am

The largest maker of wireless networks in the world – Ericsson AB – made a statement today, revealing its sales over the first quarter of the financial 2014, which failed to reach analysts’ estimates. The results are considered to be due to the fact that the company bet on more attractive deals in order to increase its profitability.

Ericsson AB posted a 9% revenue decline. The company shared that its first-quarter revenue reached 47.5 billion Swedish kronor (7.2 billion dollars). The results were below the analysts’ average estimates of 50.8-billion-kronor revenue, as well as below the 52.03-billion-kronor revenue posted for the same period in 2013.

Mr. Hans Vestberg, who is the current Chief Executive Officer of Ericsson shared that the unexpectedly sharp revenue decline was mainly due to the lower revenue from the company’s mobile broadband coverage projects located in North America. Mr. Vestberg also said that the disappointing results are also due to narrowing activity and slowing operations in Japan.

Chief Executive Officer Hans Vestberg said in the company’s statement, which was cited by Bloomberg: “Our focus on profitability is paying off. The business mix in the quarter was predominantly driven by mobile broadband capacity projects.”

The overall revenue of Ericsson in North America was reported to have fallen by 23% during the first three months of the current financial year in comparison to the results announced for the same period in 2013. According to the company’s statement, its gross margin increased from 32% in 2013 to 36.5% of sales. The result is above the analysts’ forecasts of 34.4%.

One of the analysts, who work for Evli Bank Oyj – Mr. Mikko Ervasti commented on the company’s announcement in a note to customers, which was cited by Bloomberg: “It needs to win new sizable projects in order to support the top line. Gross margin was very solid.”

Ericsson AB was losing 4.58% to trade at 82.30 Swedish krona per share by 9:14 GMT, marking a one year change of +6.63%. According to the Financial Times, the 29 analysts offering 12 month price targets for Ericsson AB have a median target of 90.00, with a high estimate of 108.00 and a low estimate of 45.00. The median estimate represents a 4.35% increase from the last price of 86.25.

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