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America helps ease Ericsson's pain

Q2 results beat forecast

Ericsson boss Hans Vestberg is breathing a sigh of relief, with America's demand for mobile broadband stabilising enough to help it beat forecasts for the second quarter.

The company announced on Friday that the North American territory had finally stabilised after declining for three quarters, helping both sales and profit forecasts for its second quarter of 2015.

Vestberg noted that US network kit sales still remain below levels of a year ago, and according to Reuters he declined to predict whether the American recovery would continue.

Net sales for the quarter were just shy of US$7.3 billion, with a decline in margin from 36.4 per cent to 33.2 per cent, and the key network business unit showed an 18 per cent year-on-year growth.

Reuters reports that growing sales of low-cost kit in China are partly to blame for the company's falling margins.

Ericsson has stuck to its own business rather than looking mergers and acquisitions for growth, but in an environment where carriers are concentrating on network upgrades rather than new builds, that strategy has hit its share price.

Reuters notes that since the Nokia/Alcatel-Lucent deal was announced in April, Ercisson's shares collapsed, and even after a 6 per cent recovery on Friday's announcement they remain 18 per cent down on the year's high.

The company's restructuring remains expensive, with 1,700 staff shed in the quarter at a cost of more than $300 million. In the quarterly report, Vestberg says Ericsson “accelerated our transformation” into an ICT company, but didn't say whether more layoffs are on the cards. ®

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