Ericsson looks to patents to help offset lower-margins - Mobile World Live

Ericsson looks to patents to help offset lower-margins

09 NOV 2011

Network vendor Ericsson will outline its future strategy and outlook for the global mobile infrastructure market at its Capital Markets Day in Stockholm today, hinting that the firm will attempt to leverage its IP portfolio to compensate for “cautious” short-term operator spending.  It also claims to now be twice as large as its nearest rival, Huawei.

In a statement ahead of the event, the firm said that it holds "27,000 granted patents covering a wide range of technologies, from wireless access to WLAN and the whole ICT value chain," and that these would become “a key revenue area with growth opportunities,” following its recent divestiture of Sony Ericsson. It claims to already be a “net receiver” of royalties, with some 90 license agreements in place.

Ericsson targets to grow its IPR revenues above the SEK4.6 billion (US$500 million) net revenue generated in 2010.

Meanwhile, the firm highlighted a “business mix shift” towards lower-margin businesses in Q4, a quarter it claims sees historically lower margins anyway. It said that the shift toward “more network modernisation and coverage projects [rather] than capacity projects” will accelerate in Q4 and – combined with growth in services – will have a dilutive effect on its gross margin.

President and CEO Hans Vestberg (pictured) said that Ericsson’s earlier market outlook outlined in May 2011 remains in place, but that “growth rates will vary between years” with “economic uncertainties in parts of the world” putting a dampener on short term operator spending.

But the firm was upbeat on its performance in terms of market share, claiming it has increased its share in the mobile infrastructure market from 32 percent in May 2011 to an estimated 36 percent today, making it twice as large as its nearest rival, Huawei. In terms of services, Ericsson claims an 11 percent market share in “a highly fragmented telecom services market,” which it says is 40 percent larger than its closest competitor.

Ericsson predicted on Monday that mobile data traffic will increase ten-fold over the next five years with almost 5 billion mobile broadband subscriptions by the end of 2016.

"The massive increase in mobile traffic is driven by usage in highly populated areas and 60 percent of the traffic growth up to 2016 will be generated in metro and urban areas,” it said today. Ericsson claims a 43 percent market share in cities, based on the installed base of mobile networks in the world's 100 largest cities.

It noted that only 35 percent of the world's population has WCDMA/HSPA coverage, and this number is expected to grow to 80 percent in 2016. Over the same time period, it predicts that population coverage of LTE will increase from today's 2 percent to 35 percent.