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. Last Updated: 07/27/2016

Ericsson Posts Record Profit But Europe Outlook Is Flat

STOCKHOLM -- Booming demand for mobile communications helped Ericsson, the world's biggest wireless network producer, to a record fourth quarter on Tuesday though analysts said the results report was mixed.

The earnings showed Ericsson performing solidly, they said, but its pretax profit and gross margin were below expectations. They also said profit margins would suffer in the future from dilution due to a shift to more services business, where it manages operators' networks as well as supplies them. Fourth-quarter pretax earnings were 16 percent higher at 10.1 billion kronors ($1.32 billion).

The Swedish firm, which already takes one of every 3 kronors invested in mobile networks, said it was winning market share as it shifts from being a supplier of boxes to a company that operates the entire network on behalf of telecoms carriers.

Helped by an increase of 450 million mobile phone users around the world, Ericsson's fourth-quarter 2005 sales came in at 45.7 billion kronors versus a forecast 43.8 billion kronors.

The new subscribers lifted the global total to 2.2 billion handset users, and Ericsson said it expected 3 billion by 2010. "This means that every second individual will have a mobile phone," CEO Carl-Henric Svanberg told reporters.

Ericsson's outlook for the key Western European market was flat as strong competition among operators as well as consolidation were slowing down investments in equipment. It remained upbeat on the emerging markets of Eastern Europe, the Middle East and Africa. Ericsson stuck to a forecast for overall moderate market growth in 2006.

Tuesday's report was the best quarterly profit in Ericsson's history, exceeding the bubble year of 2000.