Ericsson sees global network growth

Ericsson painted a rosy picture for future wireless infrastructure growth today, reporting moderate growth in its own network equipment in the 1^st quarter and projecting mid-single-digit growth for GSM/W-CDMA networks for 2007.

The news comes in contrast with the outlook of its biggest competitor Nokia, which last week projected slow network growth through the rest of the year. But Ericsson said that network build-outs were increasing throughout the world even as its primary U.S. customer Cingular cuts back on its UMTS network build after its construction peak in 2006. CEO Carl-Heinric Svanberg said at Ericsson’s earnings call today that large turnkey projects throughout western and eastern Europe, the Middle East, Africa and Asia boosted global revenues, leading to an 8% increase in sales year-over-year to 42.2 billion Swedish Kroner (U.S. $6.27 billion). Svanberg also highlighted increased operational efficiencies despite its recent spate of acquisitions. Expenses grew only 3% in Q1 and operating margins increased to 19.3%, resulting in Q1 profit of SEK 5.8 billion (U.S. $863 million), a 27% increase.

“Fixed and mobile data traffic accelerates and we have seen a doubling of traffic in mobile broadband networks over the last six months,” Svanberg said. “User-generated content is becoming a main traffic driver, with YouTube as a current example of a popular, capacity demanding, service. As a consequence, transmission is quickly become a bottleneck in many networks.”

Revenue growth for networks was up 5% over last year’s 1^st quarter to SEK 29.3 billion (U.S. $4.35 billion). And while sales were down in the U.S. growth was up 14% overall outside of North America. On the wireline side, Ericsson said revenues grew only slightly, but increases in transmission equipment, driven by increased data usage, made up for declines in switching equipment. Ericsson acquired Redback Networks and Entrisphere first quarter, which added SEK 400 million (U.S. $59.4 million) to Ericsson’s revenues for the period.

Sony Ericsson, which reported increased Q1 profits and sales last week, more than doubled its earnings year-over-year and increased its global market share of handsets to over 8%. Both its professional services and its multimedia divisions also saw gains. Professional services continued its steady growth spurt, accounting for SEK 9.5 billion in sales, up 15% year-over-year. The division now accounts for almost a quarter of all revenues. It’s smallest unit, Multimedia, boosted revenues 19% to SEK 3.4 billion. Ericsson is acquiring Tandberg Television and Mobeon this year, which add considerably to the division’s size.