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  • romangerasch romangerasch Jan 31, 2013 5:21 AM Flag

    North America Boosts Ericsson Sales

    STOCKHOLM—Ericsson ERIC -2.44% said Thursday that sales rose in the fourth quarter, helped by strong demand in North America, where investment in networks is increasing and there is less competition from Chinese equipment makers.

    The net result for the world's largest network-equipment maker, however, was deep in the red in the fourth quarter, weighed by a write-down at ST-Ericsson, its unprofitable, chip-making joint venture with STMicroelectronics STM -0.83% NV. The company said it expects profitability to improve during the second half as it starts to benefit from more lucrative contracts.

    The company posted a net loss of 6.26 billion Swedish krona ($986.0 million) in the fourth quarter, from a 1.49 billion kronor net profit in the same period a year earlier, after the 8 billion kronor write-down at ST-Ericsson.

    Sales rose 5% to 66.94 billion kronor. Sales in North America rose 51% to 17 billion kronor, up 21% from the previous quarter, the company said.

    Several major U.S. carriers, like AT&T Inc., T -0.58% have indicated that they increased investments in the fourth quarter, and earlier this month, Nokia Siemens Networks reported that its fourth-quarter sales in North America grew by 45% annually.

    Also in the U.S., the company doesn't face competition from Chinese equipment makers Huawei and ZTE Corp. 000063.SZ -1.00% as a congressional report said in October that they pose a national security threat.

    Elsewhere, Ericsson's profitability has been hit by a mix of low prices offered by Chinese makers and reluctance by telecom operators to spend on large projects due to economic uncertainties.

    Chief Executive Hans Vestberg was upbeat, however, saying that more luncrative contracts, network upgrades stemming from the rise in mobile devices and continued cost cuts should support the business.

    "While the macroeconomic and political uncertainty continues in certain regions, the long-term fundamentals in the industry remain attractive and we are well-positioned to continue to support our customers in a transforming ICT market," Mr. Vestberg said.

    Ericsson repeated that it will #$%$ options for ST-Ericsson. STMicro has said it plans to exit the joint venture, and Ericsson has said it won't buy out its 50% stake, leaving its future in doubt. The two owners have appointed J.P. Morgan JPM +0.02% to help find a buyer, according to people familiar with the matter.

    "We believe that the modem technology, which we originally contributed to the JV, has a strategic value to the wireless industry," Mr. Vestberg said.

    Investors responded positively to the quarterly sales increase, with shares higher in morning trading.

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