Ericsson said today that a slowdown in the North American market weighed on earnings, and the company expects more of the same in the months ahead. CFO Jan Frykhammar said that spectrum auctions and acquisitions are consuming carrier capital, and that spending on mobile broadband slowed down during the second half of 2014.
“Our business is impacted by operator cash flow,” said Frykhammar. “We think this trend that we have seen in the third quarter and the fourth quarter will remain slow in the short term.”
Ericsson earned half a billion dollars in Q4 on sales of $8.3 billion. Both numbers were below analysts’ expectations and net income was down 34% versus the year-ago quarter. Ericsson noted that weakness in the North American market, which accounts for 24% of sales, was offset by strength in Europe, Asia and the Middle East. Currently, Ericsson does business in 80 countries around the world, and Frykhammar said that when one part of the world is in growth mode another is often in “investment mode.”
Frykhammar said that Ericsson does get a boost from the strengthening dollar, since the Swedish company’s revenue in dollars exceeds its costs in the U.S. currency. However, Ericsson hedges its currency risks, offsetting some potential gains and mitigating potential losses.
Ericsson said that operating income improved year-on-year during Q4, driven by higher software sales and efficiency enhancements. Some of those gains were offset by investments in targeted areas.
Frykhammar said he is pleased with the progress of the company’s recent acquisitions, noting that in addition to contributing to top-line growth these purchases have brought important new skill sets to Ericsson. He said that the expertise the company acquired with the purchase of BelAir Networks has been key in the development of Ericsson’s Radio Dot small cell solution.
