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Ericsson posted stronger than expected results for its third quarter, despite continuing component shortages. These have afflicted vendors on the infrastructure and device side, indicating that the supply chain have failed to adjust swiftly to improved business conditions. On the handset front, Sony Ericsson and Apple, in particular, said their potential had been limited by scarcities in areas like touchscreens and printed circuit boards; like Ericsson, Nokia Siemens cited shortages in its results, though said the situation was improving compared to Q2.

"A key priority has been to mitigate the effects of industry-wide component shortages," said Ericsson CEO Hans Vestberg, referring particularly to base station semiconductors. "The situation has gradually improved during the quarter but it remains a challenge to fully meet the demand for mobile broadband." Ericsson said supply shortages reduced Q3 sales by between SKr2bn and SKr3bn, though this was less dramatic than the SKr3bn-SKr4bn impact in the second quarter.

In Ericsson's case, the problem was balanced by rising margins and a surge in network upgrades to support smartphones, especially in north America. "During the quarter, mobile broadband continued to grow, especially in north America and Japan," said Vestberg."We see continued growth opportunities in the market."

Ericsson posted net profit of SKr3.68bn ($554m) for the quarter, slightly ahead of analysts' expectations of SKr3.47bn and up from SKr810m a year earlier, when the Swedish giant incurred restructuring charges totalling Skr2.7bn. Sales were in line with forecasts, rising to SKr47.48bn from SKr46.43bn, though they were held back by the appreciation of the Swedish krona against the dollar.

Gross margin, excluding restructuring costs, rose to 39% from 36% a year earlier as the company benefited from cost cuts and from an increase in high value network upgrades and software sales.

Ericsson's Q3 sales in north America more than tripled from a year earlier, to SKr12.9bn from SKr4bn, spurred by mobile broadband and the Nortel acquisition. Vestberg said he did not think the consolidation phase was over, given the tough competitive market, but was cautious about further purchases by Ericsson, after its acquisition of many assets of Nortel. He said his firm always looks at potential takeover opportunities but is happy with its current portfolio.

According to Dow Jones Newswires, analyst Thomas Langer of WestLB upgraded the stock to 'buy' from 'neutral' with a price target of SKr87 after the report, commenting in a research note: "We think the market is undervaluing the company's potential, particularly in services, which are high margin with good cashflow. This will be the main theme in coming years with the introduction of LTE, which will lead to higher services margins and we expect to see more network sharing and outsourcing."

Ericsson's Global Services division contributed 40% of the group sales figure, growing 3% year-on-year to SKr19.1bn as increased sales of managed services offset a slight decline in network roll-out services.

The ST-Ericsson joint venture in chips continues to increase its losses, which hit $121m in the quarter, up from $112m (€80.4m) a year ago. The JV is in the midst of a restructuring program and its sales grew 4% year-on-year.

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