"Sales of network equipment declined due to lower demand in the current tougher market environment. Despite lower volumes, Network margins remain stable. The strong development in Professional Services continued," says Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). "Our cost reduction activities are running ahead of plan with further opportunities for efficiency improvements and savings.
As commented on in previous reports, the economic climate affects the global mobile infrastructure market and the credit environment is still tight in several emerging markets. However, other markets, including the world's leading economies such as China, India, US and Japan show good development.
The technology shift from voice telephony to mobile broadband is ongoing. Mobile broadband users and traffic are increasing rapidly and will eventually connect billions of people to internet. With the shift follows the anticipated decline in GSM sales, accelerated by the current recession, which is not yet offset by the growth in mobile broadband.
Our services operation continues to show strong development. While managed services are often in focus, systems integration and consulting are increasingly important. Services margins are stable despite being negatively affected by the start up costs in the third quarter for the Sprint and Zain services contracts as well as the reduced scope and transformation costs for the renewed managed services agreement in Italy.
In late September, we were pleased to welcome the former Sprint employees into Ericsson, and we look forward to soon also welcome former Nortel employees. This, together with the major contract wins with Verizon, AT&T and Metro PCS in mobile and fixed broadband, makes Ericsson the leading provider of telecommunications technology and services in North America.
While the current economic environment affects all parts of society the longer-term fundamentals for our industry remain solid. Mobile telephony is reaching a penetration beyond all expectations. We expect mobile broadband to show a similar exciting development over the years to come, not least as the vast majority of the world's population will be able to reach internet only through mobile technology. We are well positioned to lead our industry forward," concludes Carl-Henric Svanberg.