It makes sense for Ericsson to exit the mobile phone venture as it can strengthen its focus on telecom infrastructure equipment business. Ericsson could not do justification to its mobile phone business in line with its main rival Nokia. In the case of Nokia and Nokia Siemens Networks, both the companies grew in the past 10 years.
Ericsson’s share in Sony Ericsson’s income before tax was SEK -0.2 (0.1) billion in Q2 2011. Sony Ericsson’s Q2 2011 profitability was affected by the earthquake and tsunami in Japan. The impact on sales volumes is estimated to close to 1.5 million units, with most of the effect in the early part of the quarter.
Cash flow from operating activities during the quarter was negative EUR -224 million, mainly due to negative income, timing of certain payments, and sequential increases in accounts receivable and inventories.
Sony Ericsson made new external borrowings of EUR 165 million in the quarter resulting in total borrowings of EUR 769 million on June 30, 2011. If Sony buys out Ericsson, as suggested by media reports, it can bring in more life to the struggling phone business.
Ericsson needs to strengthen its telecom equipment business as Nokia Siemens Networks (NSN), Huawei and ZTE are aggressively looking at new businesses and new geographies. Recently, NSN received EUR 1 billion from their parents – Nokia and Siemens.
According to Ericsson financial statement, the addressable service provider network equipment market was around $95 billion in 2010, and it will show 3-5 percent CAGR in 2010-13.
The addressable telecom services market was $96-101 billion in 2010, with an estimated CAGR of 6-8 percent in 2010-13.
Ericsson’s networks’ sales in Q2 2011 were SEK 33.4 (25.5) billion. The increase of 31 percent year-over-year was an effect of mobile broadband sales and sales of IP network products such as packet core, IP routers and microwave based backhaul.
Global Services sales in the quarter were SEK 19.0 (20.1) billion, a decrease of -5 percent year-over-year. The year-over-year decrease is a result of currency exchange rate effects.
Professional Services sales were SEK 13.5 (14.8) billion in the quarter, down -9% year-over-year, negatively impacted by currency exchange rate and strong sales in the second quarter of 2010.
Managed Services sales decreased by -16% year-over-year to SEK 4.7 (5.6) billion and were down -4 percent sequentially.
Sony Ericsson’s Q2 2011 profitability was affected by the earthquake and tsunami in Japan. The impact on sales volumes is estimated to close to 1.5 million units, with most of the effect in the early part of the quarter.
Sony is nearing a deal to buy out Telefon AB L.M. Ericsson’s stake in their mobile-phone joint venture, according to media reports. Sony aims to integrate its smartphone operation with its businesses in tablets, hand-held game machines, and personal computers to save on costs and better synchronize development of mobile devices.
It is time for Ericsson to focus on telecom infrastructure business.
By Baburajan K
editor@telecomlead.com