“For the full year 2011, we had a strong sales growth and an increase in net income. In the fourth quarter, however, we saw weaker development in Networks, as well as an expected gross margin impact from a changed business mix with more coverage projects, modernization projects in Europe, and a higher services share,” says Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC).
“Group sales in the quarter were flat year-over-year and grew 15% sequentially, which is weaker than normal in the fourth quarter. The sequential growth is mainly driven by a strong development of 32% in Global Services, while Networks sales were weak, up only 2%. The sales development in Networks is mainly related to North America and Russia, where the trend continued from the third quarter with slower operator spending after a period of high investments in capacity. In addition, we saw some increased operator cautiousness during the quarter due to uncertainties such as economic development and political unrest in some countries.
2011 was a year of strong sales growth of 12%, and sales for comparable units, adjusted for currency exchange rate effects and hedging, increased 19%. In spite of weak JV results, net income increased SEK 1.3 b. to SEK 12.6 b., driven by higher sales and lower restructuring charges. The Board of Directors proposes a dividend for 2011 of SEK 2.50 (2.25), an increase by 11%.
In 2011, we have successfully executed on our strategy to leverage our strength in the growth areas mobile broadband, managed services and operating and business support systems. Many operators have had mobile broadband high on the agenda and the industry has during the year seen a shift to higher proportions of coverage buildouts. We implemented our strategy to capture new market share in the network modernization projects in Europe, despite their initial lower margins. We have further strengthened our market position in mobile networks. With 70 new managed services contracts during 2011 we are confident of our strong offering and market leadership. With the acquisition of Telcordia, now concluded, we have also gained a leadership position and skilled people in the important areas of operating and business support systems.
The quarter was challenging for our joint ventures and both reported significant losses. We have announced that Sony will acquire our 50% share in Sony Ericsson. Sony Ericsson’s loss in the quarter reflects intense competition, price erosion and restructuring charges. ST-Ericsson made a loss of the same size as in the third quarter and during the quarter we announced a new CEO who has the task to review the strategy with the objective to restore profitability.
We believe that the industry fundamentals for longer-term positive development remain solid. Short-term, we expect operators to continue to be cautious with spending, reflecting factors such as macro economic and political uncertainty. We will continue to execute on our strategy which means that the business mix, with more coverage and network modernization projects than capacity projects, will prevail short-term. With our global scale and presence, as well as technology and services leadership, we are well positioned to continue to drive and lead the industry development,” concludes Vestberg.