Telecom equipment maker Ericsson missed fourth-quarter profit forecasts, hit by lower demand from the United States and Russia, and said weak margins and cautiousness from its operator clients would continue in the short term. The company posted a fourth quarter net profit of $222 million, down 66% from $651 million in the year-ago quarter and down 61% from last quarter.
Earnings before interest and tax (EBIT), excluding the company's loss-making joint ventures, but including restructuring charges, were $605 million versus a mean forecast of $1.1 billion in a Reuters poll.
Sales, at $9.3 billion, were also well below the forecast of $9.8 billion, mainly due to the key networks unit, hit by a slowdown in spending in the United States and Russia.
In North America, Ericsson saw a sales decline of 20% from the year-ago quarter, which the company attributed to a drop in network sales, and increased development of services and multimedia, as well as a decline in CDMA sales due to the shift to LTE technology
In Northern Europe and Central Asia, the company posted a sales decline of 22%, which was especially viable in Russia, says the company.
And the company's gross margin disappointed, even though Ericsson had flagged it would be weak due to a shift in business mix to less profitable projects in Europe.
"Short-term, we expect operators to continue to be cautious with spending, reflecting factors such as macro economic and political uncertainty," Ericsson said on Wednesday. "We will continue to execute on our strategy which means that the business mix, with more coverage and network modernization projects than capacity projects, will prevail short-term."
Telecoms operators invested heavily through most of 2011 to upgrade networks to cope with surging data traffic from smartphones and tablets, but a slowdown had been expected, particularly in the United States.
Some smaller equipment vendors, such as Juniper Networks Inc and Acme Packet Inc, have issued profit warnings in recent weeks, blaming slower spending at big U.S. carriers like Verizon Communications Inc and AT&T.
(Reporting by Simon Johnson, Editing by Mark Potter)