Ericsson reported first-quarter sales up 13 percent year-on-year to SEK 53.5 billion, due largely to positive currency effects. Adjusted for comparable units and currency, revenues fell 6 percent, driven by slower mobile broadband activity in North America. Ericsson said it expects the situation to continue in North America in the near term, while it continues to benefit from the booming 4G market in China. Its Professional Services division did better in Q1, with 27 managed service contracts signed in the period, while licensing revenue was flat due to an ongoing dispute with one large customer.
This sales mix favouring network coverage over capacity projects led to a drop in the gross margin to 35.4 percent in Q1 from 36.5 a year ago. Operating profit fell to SEK 2.1 billion from SEK 2.6 billion due to higher restructuring charges of SEK 0.6 billion. The company said the restructuring is on track to achieve savings of SEK 9 billion by 2017. Ericsson also reported negative operating cash flow of SEK 5.9 billion, mainly due to increased working capital. Net profit dropped 14 percent year-on-year to SEK 1.5 billion.
