Ericsson growth led by services

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Ericsson, the world’s biggest maker of mobile telecommunications equipment, forecast “moderate growth” for the full year as it released strong third quarter results but revealed pressure on gross margins.

Pre-tax profits at the Swedish group rose by almost 25 per cent over the first nine months of the year compared with the same period in 2004, with increasing demand for professional services outstripping growth in equipment.

For the three months to September 30, the group earned SKr8bn before tax, a rise of 25 per cent on the previous year, on sales that were 14 per cent higher at SKr36.2bn. Earnings per share were SKr0.34, up from SKr0.27.

Gross margins for the first nine months of the year slipped from 46.6 per cent to 46.4 per cent, which the group said was “an effect of the quickly growing services business and a high proportion of network rollout”. Operating margins, however, improved for the same period to 19.2 per cent from 21.4 per cent.

Western European sales were “basically flat” in the three months to September 30 compared to last year, but Italy and Spain showed “strong development” over the quarter. The Swedish group echoed comments from rival Nokia on Thursday by singling out Asia Pacific as a high growth region for the group. Sales grew 20 per cent compared with the same period a year ago despite a fall in Chinese sales.

The group said it expected to see “moderate” growth in the mobile systems market, this year and next compared to to 2004.

But added that the market for related professional services would show “good” growth.

Positive results earlier in the week from Sony Ericsson and Motorola had raised expectations for Ericsson’s results. However, on Friday Ericsson shares dropped 1.5 per cent to SKr25.8 in early Stockholm trading.

Finnish mobile phone maker Nokia experienced a similar effect on Thursday when its shares fell despite raising the full-year outlook and reporting third quarter results that beat expectations.

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