Two weeks after the ouster of L.M. Ericsson’s President and Chief Executive Officer Sven-Christer Nilsson, the company revealed in its second quarter earnings report some of the financial factors contributing to Nilsson’s dismissal.
Meanwhile, competitors Nokia Corp. and Lucent Technologies Inc. chalked up strong quarters in handset sales and wireless systems, respectively, while Qualcomm Inc. reported increases in revenue and income.
Ericsson
In addition to a restructuring that apparently was not moving quickly enough, the company experienced a drop in sales and profitability in consumer products and increased operating expenses across all segments, said the company’s interim CEO Lars Ramqvist. Income before taxes fell 44 percent to $508.5 million during the first two quarters, compared with income before taxes of $904.4 million during the first half of 1998.
Ramqvist said the new management will focus on improving the operating performance of the company, speeding up the implementation of the company’s reorganization, completing the transition to the new organization and getting operating expenses under control, among other improvements.
“We are determined to have the company back on track by the end of this year,” said Ramqvist.
The company’s net income for the first half dropped 38 percent to $381.7 million, or 21 cents per share, compared with net income of $620 million, or 32 cents per share, for the first half of last year.
Ericsson’s net sales during the quarter were nearly $6.1 billion, up 16 percent from last year’s second-quarter net sales of $5.2 billion. The company’s Network Operators and Service Providers segment contributed $4.3 billion to the total, an increase of 24 percent. Mobile systems sales increased 43 percent and make up about 72 percent of the segment’s total sales, said Ericsson.
Net sales for the consumer products segment were down slightly for the quarter at $1.2 billion, compared with net sales during second quarter 1998 of $1.3 billion. The company said unit volume developed according to plan, increasing 31 percent to 13.9 million units during the first half. Ericsson said the shortfall in profitability is due to delays in the availability of new products caused by technical and production problems.
The company said sales in Europe, the Middle East, Africa and North America increased during the first six months, while sales in Latin America and the Asia Pacific were flat. New business activity in China has slowed significantly compared with the first half of last year, said the company.
For 2000, Ericsson said it expects earnings before taxes to improve from this year based on the assumptions of continued strong growth in mobile systems, positive contributions from new units, particularly Code Division Multiple Access infrastructure, improved control of operating expenses and a new mobile phones portfolio.
Nokia
While its Swedish rival has struggled, Finland-based Nokia Corp. chalked up a strong second quarter and first half. Spurred by sales growth in its telecommunications and mobile phones sectors, Nokia’s net sales increased 45 percent to $4.7 billion during the second quarter from sales of $3.3 billion during the second quarter last year.
The company’s mobile phones group’s net sales increased 58 percent to $3.1 billion, compared with net sales of $1.9 billion during the second quarter of last year. Operating profit for the mobile phones group increased 105 percent, said the company.
Nokia’s telecommunications group’s net sales increased 31 percent to $1.5 billion from $1.1 billion during the corresponding quarter last year.
Net income totaled $610 million, or 54 cents per share, compared with net income of $383 million, or 34 cents per, for the second quarter last year.
For the first six month, Nokia’s net sales were up 49 percent, with net sales for mobile phones up 72 percent and net sales for telecommunications up 28 percent. Net income for the first half was up 55 percent.
“Our overall performance during the first half of the year gives us confidence to reach or slightly exceed the high end of our 1999 net sales growth target of (25 percent to 35 percent),” said Jorma Ollila, chairman and CEO of Nokia.
Lucent
Lucent Technologies Inc. said sales of wireless systems and data networking systems were among the products that drove revenues 27 percent higher in the network operators systems sector during its third fiscal quarter. The company’s revenues in that business totaled nearly $6.1 billion.
Overall, Lucent reported its revenues during the quarter increased 22 percent to $9.315 billion, compared with revenues of $7.642 billion during the same period last year.
Net income grew 60 percent to $829 million, or 26 cents per share for the quarter, excluding one-time merger-related costs. That compares with net income for the same quarter last year of $518 million, or 17 cents per share.
Including costs of $79 million associated with the company’s acquisition of Ascend Communications, Lucent reported net income of $750 million, or 24 cents per share, compared with a net loss of $150 million, or 5 cents per share, including one-time charges associated with acquisitions during the same period last year.
Lucent said it posted 48-percent year-over-year revenue growth outside the United States during the quarter. For the first three fiscal quarters this year, Lucent’s revenues outside the United States have increased 51 percent, said the company.
Qualcomm
Qualcomm Inc. Chairman and CEO Dr. Irwin Jacobs said the company has achieved the No. 2 position in the U.S. digital phone market share, according to Dataquest research.
Total CDMA phone shipments for the quarter reached more than 1.7 million units for a cumulative total of more than 12 million units shipped. The company said component shortages limited its production growth and margin improvement during the quarter. The shortages are expected to continue and could affect the company’s results in the fourth fiscal quarter.
Revenues for Qualcomm’s communications systems business increased 9 percent to $824 million, compared with $759 million during the same period last year. The increase included significantly higher revenues from Globalstar gateways, terrestrial CDMA wireless infrastructure products and Qualcomm Personal Electronics sales to Sony, said the company.
Overall, Qualcomm reported revenues of $1 billion for its third fiscal quarter, up 15 percent from revenues of $875 million during the same quarter last year. The company attributed revenue increases to sales of Application Specific Integrated Circuits, OmniTracs units and CDMA phones as well as a significant increase in royalties.
Net income totaled $59 million, or 35 cents per share. Not including a $117 million charge associated with the sale of its CDMA infrastructure business to Ericsson, Qualcomm’s net income would have been $135 million, or 75 cents per share, compared with net income of $24.7 million, or 17 cents per share, for the corresponding quarter last year.
