Ericsson Profit Rises on Dollar, Apple Pact--second Update

By Jens Hansegard 

STOCKHOLM--Swedish telecoms equipment supplier Ericsson AB posted a strong jump in net profit in its most recent quarter thanks to higher licensing revenue, saying its broad alliance with Cisco Systems Inc. should start to bear fruit this year.

Net profit rose 67% to 7.06 billion Swedish kronor ($825.3 million) in the three months to Dec. 31, helped by a new global license deal with Apple Inc., Ericsson said on Wednesday. The company had net profit of 4.22 billion kronor in the fourth quarter of 2014.

Fourth-quarter revenue increased to 73.6 billion kronor from 68.0 billion kronor in the same period a year earlier. Stripping out disposals, acquisitions and currency fluctuations, however, revenue fell 1%.

Ericsson Chief Executive Hans Vestberg, who had struck an enthusiastic note upon announcing the partnership with Cisco in November, suggesting the two companies could start cooperating immediately, said more work was needed to align product ranges and marketing strategies.

"We've had no hiccups so far, but of course there is a lot of integration work to be done as we assemble our joint portfolios and offering to customers," Mr. Vestberg said in an interview.

Under last year's pact, Ericsson, a leader in wireless equipment, has agreed to put its global sales force at the disposal of Cisco, which dominates the market for Internet gear such as routers and switches, but has a much smaller retail footprint.

Ericsson said the alliance would help improve operating income this year and would generate $1 billion or more in additional sales by 2018.

The joining companies, however, have yet to announce their first joint contract.

Ericsson has a lot riding on the alliance because the Swedish company was struggling to cope with the fast pace of changes in the networks operated by mobile and wireline carriers, and fend off fierce competition from rivals such as Huawei Technologies Inc. and Nokia Corp.

Huawei is ramping up its activities in Europe, and is making inroads into Ericsson's home turf, the Nordics, most recently by joining with TDC Group, Denmark's largest telecom operator. Meantime, Nokia has gained weight through the acquisition of Alcatel-Lucent .

Ericsson and Apple reached a global license agreement in December, ending an almost-year long patent dispute between the companies.

Ericsson doesn't disclose details of its contract with Apple but some analysts have estimated the deal added close to 3 billion kronor to the Swedish company's operating profit in the fourth quarter.

The company said it would propose paying a full-year dividend of 3.70 kronor a share against its 2015 earnings, up from 3.40 kronor a year earlier.

Write to Jens Hansegard at [e-mail]

(END) Dow Jones Newswires

January 27, 2016 09:46 ET (14:46 GMT)

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