- After declining 13% Y/Y in Q1, Ericsson's (ERIC +8.3%) Networks (mobile infrastructure) sales rose 3% in Q2 to SEK29B ($4.26B), thereby fueling a revenue beat.
- That, in turn, is sparking a rally in rivals Alcatel-Lucent (ALU +5.3%) and Nokia (NOK +2.7%). Nokia reports on July 24, and Alcatel on July 31.
- Ericsson's remarks suggest mobile data demand drove the turnaround: Much of its sales growth came from radio access (base station) demand; sales of IP edge and IMS products were also strong; and capacity upgrades in "advanced LTE markets" (such as the U.S.) were solid due to "operators’ focus on network performance as a key differentiator." 11 new contracts were signed for Ericsson's SSR 8000 routers.
- "The usage of networks on 4G is high so operators need greater density and improvement in capacity," says CEO Hans Vestberg. He adds orders are finally being fulfilled for Chinese 4G contracts.
- Global Services revenue remains soft, declining 7% to SEK23.1B ($3.38B) after falling 5% in Q1. Support Solutions +21% to SEK2.8B ($410M) vs. +13% in Q1.
- Gross margin was 36.4%, -10 bps Q/Q but +400 bps Y/Y. Op. margin jumped 280 bps Y/Y to 7.3%. "To us, industry fundamentals will strengthen as mobile broadband networks mature, allowing Ericsson and its peers to present higher profitability," predicts ABG's Sundal Collier.
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Q2 results, PR (.pdf)