Infrastructure giant Ericsson warned of short-term challenges as operators remained cautious with their spending plans, as a result  of factors including macro economic and political uncertainty.

The company is already seeing the effects of this, with its fourth quarter profit falling by 66 percent as spend shifted to lower margin projects.

In a statement, Hans Vestberg, president and CEO (pictured), said that the fourth quarter drop was a result of “weaker development in Networks, as well as an expected gross margin impact from a changed business mix with more coverage projects, modernisation projects in Europe, and a higher services share.”

The company noted pressure in North America and Russia, where there was slower operator spending after a period of high investments in capacity. It also noted increased cautiousness due to economic development and political unrest in some countries.

“Many operators have had mobile broadband high on the agenda and the industry has during the year seen a shift to higher proportions of coverage buildouts. We implemented our strategy to capture new market share in the network modernisation projects in Europe, despite their initial lower margins,” Vestberg noted.

In the fourth quarter, the company saw a 66 percent fall in net income to SEK1.5 billion (US$220 million) from SEK4.4 billion, on revenue of SEK63.7 billion, up 1 percent. Gross margin decreased to 30.2 percent from 36.6 percent.

For the full year, net income increased by 12 percent to SEK12.6 billion, on revenue of  SEK226.9 billion, also up 12 percent. During this period, software represented 23 percent of sales, hardware 40 percent, and services 37 percent.

Ericsson also saw weak results from its joint ventures, ST-Ericsson and Sony Ericsson, which generated a loss of SEK1.9 billion in the fourth quarter, compared to a loss of SEK300 million in the prior-year period.

The company is expected to complete the sale of its stake in Sony Ericsson to Sony imminently. Separately, ST-Ericsson has warned of tough times to come, as a result of reduced demand from a major customer.

It also said that following the completion of its Telcordia acquisition, “we have also gained a leadership position and skilled people in the important areas of operating and business support systems.”