STOCKHOLM, Sweden-Ericsson largely beat Wall Street expectations with its solid fourth-quarter results, but investors sent the stock down more than 8 percent to $28.27 per share. The move comes as investors drop stocks from a variety of wireless gear makers following impressive fourth-quarter showings, a situation that analysts blame on inflated expectations.
Ericsson posted a fourth-quarter net income of about $850 million, way up from the $14 million it posted in the same quarter a year ago. The company’s sales increased to about $5.6 billion from the $5.1 billion in the same quarter a year ago. Analysts polled by Thomson First Call had predicted the company would report $5.2 billion in sales in the quarter.
“We have experienced the strongest growth in mobile users ever. With 300 million new subscribers in 2004, 27 percent of the world’s population now has access to mobile communications,” said Carl-Henric Svanberg, Ericsson’s president and chief executive officer. “This is exciting for a company with a vision of an all-communicating world.”
Ericsson’s sales were up 24 percent, which the company said was due to seasonally strong demand everywhere except North America, which the company said was down due to the “temporary impact of mergers between operators.” However, Ericsson said that as the latest spate of consolidation slows, operators will increase their focus on quality and coverage. This will pave the way for “positive development going forward,” the company said.
One sluggish note from the company’s earnings came from its gross margin numbers. Ericsson said its gross margins were slightly down sequentially due to a large number of new network rollouts in the quarter. The company’s operating margin improved though, which Ericsson said was a result of further decreasing operating expenses as a percentage of sales and an increase in other operating revenues, mainly attributable to licensing.
Ericsson said its outlook for this year remains positive.
“We are forecasting a slight growth in global mobile systems market in U.S. dollar terms,” Svanberg said.
Separately, Ericsson introduced a stock incentive program for its 50,600 employees.
