Mobile Systems Sales Drive Up Ericsson's Q1 Profit

STOCKHOLM (04/28/2000) - Bolstered by higher margins in sales to network operators, mobile phone and network equipment vendor L.M. Ericsson Telephone Co. today posted sharply higher earnings for its first fiscal 2000 quarter.

Operating income for the quarter ended March 31 jumped to 6.4 billion kronor (US$715 million), up 257 percent over the 1.8 billion kronor the company reported for the same period last year, the company said in a statement.

Net income, including one-time capital gains and losses, rose to 4.2 billion kronor, an increase of 369 percent from 905 million kronor a year ago. Income per share in accordance with U.S. GAAP (generally accepted accounting principles) for the first quarter was 2.53 kronor, up from 0.80 kronor.

Revenue grew by a more modest 42 percent to 59.1 billion kronor from 41.6 billion kronor in the first quarter of 1999.

Sales to network operators, which grew by 36 percent from a year ago, made up two-thirds of total sales revenue, with sales of mobile systems making up 53 percent of the total, Ericsson said. Operating margin in the network equipment segment more than doubled to 15 percent from 7 percent in the year ago quarter, resulting in an operating income of 5.8 billion kronor.

While Ericsson reported 53 percent growth in sales of consumer products, a segment which includes the company's mobile phone handsets, this business unit managed to turn an operating income of only 457 million kronor on sales of 14.8 billion kronor. Unit volume at 10.5 million was up 57 percent from first quarter last year. Although an improvement from last year's zero percent, the 3 percent profit margin was a far cry from the 24 percent rival Nokia Corp. reported yesterday for its handset sales. [See "Nokia Posts Strong Q1 Profit, Revenue Growth," April 27.]Sales were strong in all geographical regions, with the exception of China, where sales during the quarter were hit by a low order intake last year, Ericsson said.

Buoyed by strong growth in the mobile systems segment, Ericsson raised its sales growth forecast for the full year from at least 20 percent to more than 25 percent and said that it also continues to expect "substantial" earnings growth. Second-quarter 2000 sales are expected to be up more than 25 percent, and income before taxes in the quarter to double compared to the same period last year, Ericsson said in the statement.

Investors were quick to buy into the positive outlook. In mid-morning trading on the Stockholm Stock Exchange, following the release of the report, Ericsson shares were up more than 7 percent on the day, trading at 823 kronor.

Ericsson, in Stockholm, can be reached at +46-8-719-0000, or via the Web at http://www.ericsson.com/.

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